[Senate Hearing 110-1117]
[From the U.S. Government Printing Office]
S. Hrg. 110-1117
THE FUTURE OF RADIO
=======================================================================
HEARING
before the
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
OCTOBER 24, 2007
__________
Printed for the use of the Committee on Commerce, Science, and
Transportation
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
DANIEL K. INOUYE, Hawaii, Chairman
JOHN D. ROCKEFELLER IV, West TED STEVENS, Alaska, Vice Chairman
Virginia JOHN McCAIN, Arizona
JOHN F. KERRY, Massachusetts TRENT LOTT, Mississippi
BYRON L. DORGAN, North Dakota KAY BAILEY HUTCHISON, Texas
BARBARA BOXER, California OLYMPIA J. SNOWE, Maine
BILL NELSON, Florida GORDON H. SMITH, Oregon
MARIA CANTWELL, Washington JOHN ENSIGN, Nevada
FRANK R. LAUTENBERG, New Jersey JOHN E. SUNUNU, New Hampshire
MARK PRYOR, Arkansas JIM DeMINT, South Carolina
THOMAS R. CARPER, Delaware DAVID VITTER, Louisiana
CLAIRE McCASKILL, Missouri JOHN THUNE, South Dakota
AMY KLOBUCHAR, Minnesota
Margaret L. Cummisky, Democratic Staff Director and Chief Counsel
Lila Harper Helms, Democratic Deputy Staff Director and Policy Director
Christine D. Kurth, Republican Staff Director and General Counsel
Paul Nagle, Republican Chief Counsel
C O N T E N T S
----------
Page
Hearing held on October 24, 2007................................. 1
Statement of Senator Cantwell.................................... 1
Prepared statement........................................... 1
Statement of Senator Dorgan...................................... 2
Statement of Senator Inouye...................................... 15
Statement of Senator McCaskill................................... 3
Statement of Senator Snowe....................................... 16
Prepared statement........................................... 16
Statement of Senator Sununu...................................... 52
Witnesses
McCaughan, Mac, Co-Founder, Merge Records........................ 3
Prepared statement........................................... 6
Pierson, Carol, President and CEO, National Federation of
Community Broadcasters......................................... 38
Prepared statement........................................... 39
Rehm, Dana Davis, Senior Vice President, Strategy and
Partnerships, National Public Radio............................ 42
Prepared statement........................................... 44
Turner, S. Derek, Research Director, Free Press; on Behalf of
Consumers Union, Consumer Federation of America................ 22
Prepared statement........................................... 24
Westergren, Tim, Founder and Chief Strategy Officer, Pandora
Media on Behalf of the Digital Media Association............... 17
Prepared statement........................................... 18
Withers, Jr., W. Russell, Founder and Owner, Withers Broadcasting
Companies, on Behalf of the National Association of
Broadcasters................................................... 8
Prepared statement........................................... 9
Appendix
Letter, dated November 15, 2007 from the Future of Music
Coalition to the Senate Committee on Commerce, Science, and
Transportation................................................. 59
Response to written questions submitted by Hon. Maria Cantwell
to:
Mac McCaughan................................................ 65
Carol Pierson................................................ 73
Dana Davis Rehm.............................................. 75
S. Derek Turner.............................................. 71
W. Russell Withers, Jr....................................... 67
Response to written questions submitted by Hon. Daniel K. Inouye
to:
Mac McCaughan................................................ 65
Carol Pierson................................................ 73
Dana Davis Rehm.............................................. 75
S. Derek Turner.............................................. 70
Tim Westergren............................................... 70
W. Russell Withers, Jr....................................... 66
Smith, Hon. Gordon H., U.S. Senator from Oregon, prepared
statement...................................................... 59
THE FUTURE OF RADIO
----------
WEDNESDAY, OCTOBER 24, 2007
U.S. Senate,
Committee on Commerce, Science, and Transportation,
Washington, DC.
The Committee met, pursuant to notice, at 10:02 a.m. in
room SR-253, Russell Senate Office Building, Hon. Maria
Cantwell, presiding.
OPENING STATEMENT OF HON. MARIA CANTWELL,
U.S. SENATOR FROM WASHINGTON
Senator Cantwell. Good morning, the Senate Committee on
Commerce, Science, and Transportation will come to order, and
we're having a full Committee meeting this morning on the
future of radio.
We are joined by Carol Pierson, President and CEO of
National Federation of Community Broadcasters, welcome. Ms.
Dana Davis Rehm, Senior Vice President for Strategy and
Partnerships from NPR, thank you for being here. Mr. S. Derek
Turner, Research Director for the Free Press, thank you very
much. Mr. Tim Westergren, Chief Strategy Officer and Co-Founder
of Pandora Media, I'm sure we're going to hear more about what
that is, thank you. And, Mr. Mac McCaughan, Founder of Merge
Records, and member of Superchunk, and Mr. Russell Withers,
Founder and Owner of Withers Broadcasting, on behalf of the
National Association of Broadcasters.
Welcome, all. This morning we are scheduled to have a vote
at 11:00 which may be followed by a couple of votes, so I'm
going to forego my opening statement and submit it to the
record so that we might hear from you, and maybe even get to a
question and answer period before that.
But I'll see if any of my colleagues wish to do the same,
or to make an opening statement.
[The prepared statement of Senator Cantwell follows:]
Prepared Statement of Hon. Maria Cantwell, U.S. Senator from Washington
I want to welcome everyone to the hearing on the future of radio. I
want to thank Chairman Inouye and Vice Chairman Stevens for calling
this important hearing.
Radio remains a vital means to inform and educate listeners
throughout the country as well as serving to entertain them. Today,
consumers have an overwhelming number of choices on how to spend their
leisure time.
Radio is but one among many choices consumers have and over-the-air
radio broadcast is but only one means for distributing audio
programming to listeners. There is also satellite radio, Internet
radio, podcasts on iPods and MP3 players, as well as downloads on
wireless phones. Consumers also can receive audio channels with
subscriptions to cable or satellite television service. And they can
always listen to CDs or old cassettes and albums.
As the lines of traditional radio get blurred and the digital
delivery of audio programming occurs over an increasing number of
platforms, consumers will have more choices than they know what to do
with as to what they listen to, how they listen to it, when they listen
to it, and where they listen to it.
But it is not going to all happen overnight. Unlike the transition
to digital television, the transition to digital radio is voluntary.
And there are still critical details that need to be worked through.
For that reason alone, terrestrial radio will continue to play an
essential role for a considerable time to come. Ultimately, I see these
different audio platforms as complementing each other rather than
competing with one another.
The value of terrestrial radio in fulfilling the Commission's
mission in promoting ``competition, diversity, and localism'' can't be
understated.
But unfortunately, the 1996 Telecom Act brought about massive radio
industry consolidation, a loss of localism, and a lack of programming
diversity.
A recent bright spot, though, has been Low Power FM radio. These
community-based, non-commercial radio stations create hours of original
local programming, can tailor their services to niche populations, and
are an inexpensive means of adding another voice to a consolidated
radio market.
After the FCC did its due diligence on potential interference, it
launched the new Low Power FM service in 2000. A rider to an
appropriations bill later that year, made a technical change to the FCC
rule and required additional testing, effectively limiting the service
from being licensed in more populated areas.
Those additional tests by an outside lab cost the taxpayer millions
of dollars and came up with the same conclusion as the FCC. Senator
McCain and I have introduced legislation in the last three Congresses
to try and set things right.
And as we look ahead, we must also take stock of where we have
been.
The Telecommunications Act of 1996 lifted all nationwide ownership
limits for radio station broadcasters, and permitted a single entity to
own and operate as many as eight stations in the Nation's largest
markets.
Three years later, the FCC relaxed its television-radio cross-
ownership rule. This was followed in 2003, by the FCC replacing its
rules prohibiting newspaper-broadcast cross ownership as well as its
1999 local television-radio cross ownership rule, with a single rule on
cross media limits.
As we all know these specific rules were remanded by the Third
Circuit Court in Philadelphia, and never went into effect.
Last year, the Commission began the process for reviewing all of
the remanded rules as well as conducting its required periodic review
of media ownership rules.
A number of my colleagues from both sides of the aisle have
expressed concerns how the Commission has conducted the review to date.
At times, I have the impression that the Chairman has his answer,
particularly with respect to eliminating the existing media cross
ownership rules, and this whole process is all about checking off the
necessary boxes rather than getting at the facts. I hope that is not
the case.
Based on statements made by Chairman Martin, it appears that he
wants to wrap the proceeding up and issue rules by this December 18th.
I think this would be a major miscalculation on his part.
I want to assure Chairman Martin that people really care about
media ownership. I know people back home in Washington State do. And
they take every opportunity to tell me so. I hope that Chairman Martin
will not short circuit the process.
I look forward to hearing from the panel.
STATEMENT OF HON. BYRON L. DORGAN,
U.S. SENATOR FROM NORTH DAKOTA
Senator Dorgan. Madam Chair, let me take just a minute and
a half. Because of the time problem, I will be very brief. But,
I want to say that I think this is a very important hearing.
I'm a cosponsor of the Local Community Radio Act which deals
with Low Power FM, I'm a cosponsor of the Internet Radio
Equality Act. I've opposed the merger of satellite radio
companies XM and Sirius. There's a lot to talk about with
respect to the future of radio.
But I want to talk just for 1 minute, especially about the
proposed FCC proceedings, with respect to the concentration of
ownership, that is, relaxing the ownership limits on
broadcasters--radio and television--and also allowing cross-
ownership of newspapers. Senator Trent Lott and I, we're having
a press conference at noon today on that subject.
But, I think those listening and those paying attention to
the FCC should understand they're going to be in for a huge
battle, if they think they're going to go now and begin,
between now and the middle of December, relax the ownership
limits on television and radio that has already had dramatic
concentration--far more than is healthy for this country--and
then at the same time, allow cross-ownership with newspapers.
I just want people to understand, the FCC is going to be in
for a big fight if it caves in to the interests that are
pushing them to relax ownership rules, that is not in the
interests of this country.
So, I wanted to make that point. But, I know this is about
radio, and I appreciate having the hearing.
Senator Cantwell. Senator McCaskill, do you wish to make an
opening statement?
STATEMENT OF HON. CLAIRE McCASKILL,
U.S. SENATOR FROM MISSOURI
Senator McCaskill. Briefly, Madam Chair, I agree with many
of the things that Senator Dorgan has indicated. I,
particularly, have heart palpitations about the idea that one
company--having more spectrum than the entire FM band--I mean,
just think about that. One company, having more spectrum than
the entire FM band. And one national company with more channels
than its local competition combined, in every market in
America.
I think those things are something that we need to be very
focused on, I think it is our job to speak for those people out
there that we don't hear, and there are a lot of people out
there whose voices we don't hear in the halls of Congress. And,
I think it's important that we do that, and I think this
hearing is an important part of that, and I look forward to the
testimony.
Thank you, Madam Chair.
Senator Cantwell. Thank you, and again, welcome to the
witnesses who are here to have a hearing on the future of
radio.
Mr. McCaughan, I think we'll start with you, and just go
right down the line. And if people could keep their comments to
5 minutes, we are going to have a timer on this morning. But if
you could keep track, and obviously we'll accept longer
statements and information for the record.
But, again, welcome Mr. McCaughan, thank you for being
here.
STATEMENT OF MAC McCAUGHAN, MUSICIAN AND
CO-FOUNDER, MERGE RECORDS
Mr. McCaughan. Madam Chair and Members of the Committee,
it's an honor to testify before you today at such a crucial
hearing. My name is Mac McCaughan, the Co-Founder of Merge
Records, which is an independent record label, we're based in
North Carolina. And, we've released over 300 albums from 60
different bands over the past 20 years.
I'm also a musician and a songwriter with 11 full-length
records released by my band Superchunk, 6 albums that I've
recorded under the name Portastatic--and I'd like to apologize
in advance for needing to refer to my notes today, I'm used to
performing on stage, but I can, I have a memory for song
lyrics, but I hope you trust me when I say, you do not want to
hear me sing my testimony this morning.
[Laughter.]
Mr. McCaughan. Radio has always been important to me, in
fact, I think it has a lot to do with why I sit here today.
Unlike any other medium, I think radio fosters a direct
relationship between music and the listener. As a kid, I went
to sleep and woke up to the radio, and that was at a time when
even album rock radio featured music that was chosen by the
DJ--new records, his or her favorite new records.
Around the age of 13, I began listening to college radio,
which exposed me to all different kinds of music that you can
never hear on Top 40 or album rock stations. And that music,
that I discovered via college radio, really set me on the
course of making music myself, and eventually starting a record
label, which is Merge.
As both a performer and a label owner, I've relied on radio
as an essential component of the work that we do in getting our
music out there to people who want to hear it.
I come here today to offer my perspective on the current
state, and possible future, of broadcasting, and I urge you to
adopt policies that encourage localism, competition and
diversity on the airwaves.
I'd like first to talk about the value of community-based
and noncommercial radio. Low power, college, NPR, and other
noncommercial broadcasting enterprises are extremely important
today, especially as local information and entertainment
options become more scarce. Commercial radio is about
aggregating the largest possible number of listeners in a
targeted demographic, but community-based radio is about
serving its audiences. It has a unique power and desire to be a
conduit for news and culture, and is essential to the diversity
that defines cultural life in this country.
As a record label owner, I can tell you that noncommercial
radio has been a leading source of support for the music that
we release, and we would not have had the chance to introduce
many of our artists to music listeners and build such a
dedicated customer base without the help of noncommercial
radio. Broadcasters such as KEXP, KCMP, KCRW, WXPN and in North
Carolina, WXYC and WXTU continue to program a wide variety of
independent and local music on the dial, in the community and
on the web. And WXYC in Chapel Hill, incidentally, was the
first radio station, 10 years ago, to begin broadcasting over
the Internet, 24 hours.
For a label like ours, and many other musicians out there,
support of noncommercial radio which is programmed by people as
passionate about music as we are, is essential. Congress should
take action to allow for the growth of noncommercial radio, and
the expansion of Low Power FM into more urban settings.
In 2000, Congress passed legislation to limit the FCC's
ability to issue noncommercial Low Power FM radio licenses in
more populated communities across the country. And lifting this
ban once and for all will lead to a significant expansion of
community-based stations that will prioritize local and
independent content and news, not to mention programming that
highlights the kind of musical genres that are routinely
ignored by commercial radio.
I also want to urge this Committee to take the necessary
steps to ensure that our media landscape does not become even
more consolidated. The deregulation that followed the 1996
Telecommunications Act allowed for unprecedented consolidation
in commercial radio which has resulted in homogeneity, is often
out of step with artists, entrepreneurs, media professionals,
and educators, not to mention the listeners.
Back before the Telecom Act, this commercial radio industry
was much more competitive. DJs and programmers in markets
around the country were eager to play new music. This big piece
of rock history is no longer, as corporate radio's sense of
adventurism, localism, and risk-taking is a thing of the past.
Nowadays, you are much more likely to hear new, independent
music in a TV show, in a car commercial, in a video game, on
satellite radio or community radio station than on commercial
radio. Although label owners, artists and listeners would be
thrilled to hear more independent music on commercial radio, in
most cases this chance simply does not exist.
As a specific example, from our experience at Merge, two of
the albums that we've released in 2007 by the bands Arcade Fire
and Spoon both debuted on the Billboard Top Ten. The bands both
played on Saturday Night Live, which is a real coup for bands
on a label of our size, and the mainstream print media has
written extensively about them. Both bands tour the world,
playing highly successful, sold-out concerts. Spoon performed
here in D.C. last night at a sold out show at the 9:30 Club,
which was broadcast on NPR, yet both of these bands have been
virtually absent from the commercial airwaves throughout the
trajectory of their careers.
Instead, it's been noncommercial radio that has played a
leading role in helping these bands reach a mainstream
audience, just like it does with a majority of our other
artists, bands like Camera Obscura, M. Ward, The Clientele,
North Carolina's own Rosebuds. Because the independent music
community's business model focuses on selling tens of thousands
of albums instead of millions, Merge and other independent
labels can rely on a combination of noncommercial radio and the
Internet for promotion and distribution.
But if Congress and the FCC implement policies that open up
commercial radio for independent artists and labels, it could
change the economics of the independent sector and the culture
at large.
It's been widely reported that the FCC is considering
altering the media ownership rules again, and loosening the
local ownership caps to allow major radio groups to buy even
more stations in each market. And no matter what your taste in
entertainment or news, if you value localism, competition and
diversity, Congress and the FCC must recognize that further
deregulation is not the answer.
Finally, I'd like to talk about the value of the Internet--
--
Senator Cantwell. Mr. McCaughan, you're a little over your
time. It's like, you know, song length.
Mr. McCaughan. OK, sure.
Senator Cantwell. So, if you could--we're interested in all
that you have to say, kind of summarize and then we'll get onto
our other panelists, and then we can take the rest of your
testimony for the record.
Mr. McCaughan. OK, great.
Senator Cantwell. Thank you.
Mr. McCaughan. I was going to summarize by saying that the
Internet is incredibly important to a label like Merge, for
getting our music out there, exposing it to people, and you
know, we'd like to keep the information flowing and keep
technology growing without resorting to the old bottleneck that
would be created by a tiered Internet, things such as this.
To conclude, artists who thrive outside the commercial
realm depend on and deserve open access to public platforms
such as the airwaves and the Internet. Likewise, communities
and citizens should have access to localized and diverse media.
This is not just a means of doing business, but also an
important facet of American life that needs to be nurtured and
protected.
I'd like thank Chairman Inouye and the Members of the
Committee for taking the time to consider these issues, and
it's my hope that those involved in the decisionmaking process
on these issues can take something from the statements I have
made.
I would be happy to answer your questions after the
testimony.
[The prepared statement of Mr. McCaughan follows:]
Prepared Statement of Mac McCaughan, Co-Founder, Merge Records
Chairman Inouye, Senator Stevens and members of the Committee, it
is an honor to testify before you today at such a crucial hearing.
My name is Mac McCaughan, and I'm the Co-Founder of Merge Records,
an independent record label based in Chapel Hill, North Carolina, that
has released over 300 albums from the 60 bands on our roster over the
past 20 years. I'm also a musician and a songwriter, with 11 full-
length records released by my band Superchunk, and 6 albums I've
recorded under the name Portastatic.
Radio has always been very important to me. In fact, it has a lot
to do with why I sit here today. Unlike any other medium, radio fosters
a direct relationship between music and the listener. As a kid I went
to sleep and woke up to the radio in an era when--even on album rock
radio--the DJ was playing his or her favorite new records. Then, at the
age of 12, college radio exposed me to music that I had never heard on
top 40 or album rock stations. The music I discovered then set me on
the course of making music myself and starting a record label. And
since that time, as both a performer and a label owner, I have relied
on radio as an essential component of the work we do helping audiences
learn about our music.
I come here today to offer my perspective on the current state and
possible future of broadcasting, and to urge you to adopt policies that
encourage localism, competition and diversity on the airwaves.
First, I'd like to talk about the value of community-based and non-
commercial radio. Low-power, college, NPR and other non-commercial
broadcasting enterprises are extremely important today, especially as
local information and entertainment options become scarcer. Commercial
radio is about aggregating the largest possible number of listeners in
a targeted demographic. Community-based radio is about serving its
audiences. It has the unique power and the desire to be a conduit for
news and culture, and is essential to the diversity that defines
cultural life in this country.
As a record label owner, I can tell you that non-commercial radio
has been a leading source of support for our label's music. We would
not have had the chance to introduce many of our artists to music
listeners--and build such a dedicated customer base--without the help
of non-commercial radio. Broadcasters such as KEXP, KCMP, KCRW, WXPN
and North Carolina's own WXYC and WXDU continue to program a wide
variety of independent and local music, on the dial, in the community
and on the web. For a label like ours, and many other musicians out
there, the support of non-commercial radio, which is programmed by
people as passionate about music as we are, is essential.
Congress should take action to allow for the growth of non-
commercial radio, and the expansion of Low Power FM into more urban
settings. In 2000, Congress passed legislation to limit the FCC's
ability to issue non-commercial Low Power FM radio licenses in more
populated communities across the country. Lifting this ban once and for
all will lead to a significant expansion of community-based stations
that will prioritize local and independent content and news, not to
mention programming that highlights kinds of musical genres that are
routinely ignored by commercial radio.
I also want to urge this committee to take the necessary steps to
ensure that our media landscape does not become even more consolidated.
The deregulation that followed the 1996 Telecommunications Act allowed
for unprecedented consolidation in commercial radio, which has resulted
in a homogeneity that is often out-of-step with artists, entrepreneurs,
media professionals and educators--not to mention listeners.
Back before the Telecom Act, the commercial radio industry was much
more competitive, with deejays and programmers in markets around the
country eager to play new music. This big piece of rock history is no
longer, as corporate radio's sense of adventurism, localism and risk-
taking is a thing of the past. Nowadays, you are much more likely to
hear new independent music in a TV show, in a car commercial, in a
video game, on satellite radio or community radio stations than on
commercial radio. Although label owners, artists and listeners would be
thrilled to hear more indie music on commercial radio, in most cases,
the chance simply does not exist.
Let me give you specific examples from our experience at Merge. In
2007, two of the albums we released--by the bands Arcade Fire and
Spoon--both debuted in the Billboard Top Ten. They appeared on Saturday
Night Live. The mainstream print media has written extensively about
them, and both bands tour the world, playing highly successful, sold
out concerts. Yet both of these bands have been virtually absent from
the commercial airwaves.
Instead, it's been non-commercial radio that has played a leading
role in helping these bands reach a mainstream audience, just like it
does with the majority of our other artists, bands like Camera Obscura,
M. Ward, The Clientele and The Rosebuds. Because the independent music
community's business model focuses on selling tens of thousands of
albums instead of millions, Merge and other independent labels can rely
on a combination of non-commercial radio and the Internet for promotion
and distribution. But if Congress and the FCC implement policies that
open up commercial radio for independent artists and labels, it could
change the economics of the independent sector and the culture at
large.
It's been widely reported that the FCC is considering altering the
media ownership rules again and loosening the local ownership caps to
allow major radio groups to buy even more stations in each market. No
matter what your tastes in entertainment or news, if you value
localism, competition and diversity, Congress and the FCC must
recognize that further deregulation is not the answer.
Finally, I'd like to talk about the value of the Internet. Given
that Merge Records and artists we represent have had little access to
commercial radio, the Internet has become a powerful new platform
through which we can promote, distribute and sell our music. Credit
must go to non-commercial broadcasters and NPR, which are leading the
way in using technologies to offer new content delivery methods such as
webcasting and live concert feeds, in addition to their regular
programming, but that's not all. An exciting range of emerging
technologies such as Internet radio, satellite radio, music
subscription services, digital music stores and new webcast services
like Mog, Pandora and Last.fm that have expanded the opportunities for
independent bands and labels worldwide. Not just our label, but any
label and artist should have the benefit of competing on an equal
playing field, as new technologies emerge that help musicians connect
with audiences. An Internet based on the principles of network
neutrality allows these experiments in commerce and technology to grow.
Any policy decision that enables the reestablishment of old bottlenecks
or creates a tiered Internet would be a tremendous step backward.
To conclude, artists who thrive outside of the commercial realm
depend on and deserve open access to public platforms such as the
airwaves and the Internet. Likewise, communities and citizens should
have access to localized and diverse media. This is not just a means of
doing business, but also an important facet of American life that needs
to be nurtured and protected.
I want to thank Chairman Inouye and the members of this committee
for taking the time to consider the issues surrounding community access
to broadcasting and other important media concerns. It is my hope that
those involved in the decision-making on these issues can take
something from the statements I have made. Thank you for inviting me to
testify today. I will be happy to answer your questions.
Senator Cantwell. Thank you, Mr. McCaughan.
Mr. Withers?
STATEMENT OF W. RUSSELL WITHERS, JR., FOUNDER AND
OWNER, WITHERS BROADCASTING COMPANIES, ON BEHALF
OF THE NATIONAL ASSOCIATION OF BROADCASTERS
Mr. Withers. Good morning, Chairman Inouye, and members of
the Committee, my name is Russ Withers, I'm the Owner of
Withers Broadcasting Companies, which operates 30 local radio
stations and 6 television stations in 7 states, including
Missouri and West Virginia.
I'm testifying on behalf of the National Association of
Broadcasters where I serve as Chairman of the NAB Radio Board
and a member of the Executive Committee.
Radio's future is very bright, and I'll offer a perspective
today from over 50 years working in radio, on a variety of
issues, among them Low Power FM, media ownership and copyright
fees.
First, with respect to Low Power FM. Broadcasters strongly
support the current third adjacent channel protection and have
serious concerns with introducing thousands of micro-radio
stations to the FM band. Broadcasters do not oppose licensing
Low Power FM, in fact, the FCC has authorized 811 Low Power FM
operators, others have received construction permits or have
applications pending at the FCC, and we encourage the
Commission to act on these within the existing policy.
LPFM stations exist today within third adjacent protection
for a reason, and that's to guard against interference to both
LPFMs and full-power stations.
With respect to media ownership, let me also be clear.
Broadcasters are not asking for total deregulation. Our message
is simple: We must have reasonable rules that reflect the
current competitive radio environment. With reasonable rules,
we can have a vibrant industry that will continue to provide
the service that our local communities expect--whether that's
lifeline service in times of emergency, or entertainment and
informational programming every day.
Some will argue that the changes to the broadcast ownership
rules adopted in the 1996 Telecom Act have not served the
public interest, but they forget that at least part of the
reason that you, here in Congress, directed the FCC to make
those changes, was because the fragmented broadcast industry--
particularly for radio--was in serious trouble.
In the early 1990s, the FCC reported that more than half of
all stations were losing money, and almost 300 stations had
gone silent. You can't serve the public interests with no
service.
Since 1996, however, numerous studies have shown that the
changes within local broadcast markets, especially among radio
stations, have enhanced the diversity of programming offered by
local stations, and another study demonstrated that localism is
still alive and well, despite the rule changes. There are more
radio stations today in the United States than at any time in
our history.
Despite claims that the radio industry has been swallowed
up by a few corporate giants, there are more than 4,490
different owners of the approximately 13,500 full-power
stations in this country, and according to the FCC, more than
6,498 of those are locally owned.
I can assure you that I and my fellow broadcasters are on
the job every day, serving and contributing to our communities.
You need only look at the California wildfires this morning, as
evidence of our commitment. We need reasonable ownership rules
to allow us to keep providing the service.
Turning now to the issue of copyright fees. The NAB
supports legislation to vacate the Copyright Royalty Board
decision, and to establish new rules for Internet streaming of
music. The CRB decision earlier this year caused serious harm
in two ways.
First, the cost for radio stations to stream music will
drastically increase, and second, the new CRB rates are a
barrier to entry for many stations that want to be part of the
Internet revolution.
We support a new and fair rate structure that encourages
Internet streaming. We've made attempts to work with the
recording industry to reach compromise, and were left waiting
92 days for an answer. As a result of their stonewalling, we
all face a very uncertain future for what was becoming a
growing and exciting platform for music.
Lastly, Mr. Chairman, I want to address the issue of
performance fees, and the attempts by the recording industry to
impose what broadcasters consider to be a performance tax on
local radio.
Local radio and the performing industry have always enjoyed
a mutually beneficial relationship that can be distilled down
to one concept--free music for free promotion. Local radio
offers the recording industry a listening audience of 232
million listeners a week, to promote and expose music. That
drives consumers to go buy music, attend concerts, and purchase
artist merchandise.
Now, with slowing sales, and arguably a flawed business
model for the digital age, the recording industry is looking to
recoup their waning revenues through a performance tax on local
radio broadcasters. Local radio, however, is not the reason the
recording industry is suffering from declining profits, and
local radio should not be used as a bail-out fund.
Radio broadcasters will fight this tax to preserve a local
radio system that remains free, essential and available to all
consumers.
Thank you for inviting me here today, and I look forward to
your questions.
[The prepared statement of Mr. Withers follows:]
Prepared Statement of W. Russell Withers, Jr., Founder and Owner,
Withers Broadcasting Companies, on Behalf of the National Association
of Broadcasters
Good morning, Chairman Inouye, Vice Chairman Stevens, and members
of the Committee, my name is W. Russell Withers, Jr., I am the Founder
and Owner of the Withers Broadcasting Companies, which own and operate
30 local radio stations and six television stations in seven states. I
am also a Member of the Board of Directors of the National Association
of Broadcasters (NAB) and the Chair of the NAB Radio Board. NAB is a
trade association that advocates on behalf of more than 8,300 free,
local radio and television stations and also broadcast networks before
Congress, the Federal Communications Commission (FCC) and other Federal
agencies, and the courts.
This is a hearing about the future of the radio industry, so let me
start with a simple fact: radio, as an industry, is not the same as it
was 10 years ago, 20 years ago or 40 years ago. I have been a part of
this industry for more than 50 years, and I have watched the media
industry change. How people listen to music has changed. How they
receive and engage with the news has changed. And for radio owners like
myself, the competitive pressures are very different.
Originally, we used to just compete with each other, and maybe a
few local newspapers. Those days are long gone. Now, radio stations are
competing for the same advertising dollars as television, cable,
newspapers, Internet sites and huge Internet aggregators like Google.
Even in the face of these changes and competitive pressures,
however, my industry has not, and will not, forget that our primary
task is service to the community. Our core product--top-quality music,
news, local information, weather and emergency services for our local
communities provided without charge--remains much the same. We are
there for our local communities every day. We are there to help inform
our communities when weather or other emergencies occur. And,
importantly, we are there to help when the emergency is over. Unlike
some national entities that show up to report disasters and such, we
don't leave--we remain part of the community when the effects of the
disaster linger on and on. In fact, broadcasters contribute more than
ten billion dollars in community service every year. In short, you
would be hard pressed to find an industry that contributes more to
their local communities than broadcasters.
There are some other interests that will try to tell you a
different story. Some vocal groups regularly contend that the radio
industry in this country has been swallowed up by a few corporate
giants who do not care about the communities they serve. Well, here is
another fact: there are more radio stations today in the United States
than at any point previously. In fact, despite all the boisterous
complaints about media consolidation, there are more radio station
owners today than there were in 1972. Sure there are some large
companies, as there are in any industry worth investing in. But, there
are also thousands of other radio station owners. And we all serve our
local communities.
Media Ownership
As a radio owner, I can tell you that we need to have reasonable
media ownership rules. The rules that govern this industry should
reflect the undeniable changes in the media marketplace. It is easy to
see the past through rose colored glasses. But everyday, radio stations
owners like myself have to deal with reality. And the reality is that
outdated regulations can hold us back from competing with industries
that are not regulated like ours.
You here in Congress recognized the relationship between reasonable
rules and a healthy radio industry back in 1996 when you mandated
reform of the highly restrictive ownership rules then in place.
Remember the state of the broadcast industry before 1996. In 1992, for
example, the FCC found that, due to ``market fragmentation,'' many in
the radio industry were ``experiencing serious economic stress.''
Revision of Radio Rules and Policies, Report and Order, 7 FCC Rcd 2755,
2756 (1992) (FCC Radio Order). Specifically, stations were experiencing
``sharp decrease[s]'' in operating profits and operating margins. Id.
at 2759. By the early 1990s, ``more than half of all stations'' were
losing money, and ``almost 300 radio stations'' had gone silent. Id. at
2760. Given that the radio industry's ability ``to function in the
`public interest, convenience and necessity' is fundamentally premised
on its economic viability,'' the Commission concluded that ``radio's
ability to serve the public interest'' had become ``substantially
threatened.'' Id. Accordingly, the Commission believed that it was
``time to allow the radio industry to adapt'' to the modern information
marketplace, ``free of artificial constraints that prevent valuable
efficiencies from being realized.'' Id.
Congress agreed. That is why, in 1996, you acted to ``preserve and
to promote the competitiveness of over-the-air broadcast stations.''
\1\ Congress found that ``significant changes'' in the ``audio and
video marketplace'' called for a ``substantial reform of Congressional
and Commission oversight of the way the broadcasting industry develops
and competes.'' House Report at 54-55.
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\1\ H.R. Rep No. 204, 104th Cong., 2d Sess. at 48 (1995) (``House
Report'').
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I submit that we should not ignore these important lessons of the
past. Policies that would turn back the clock so that broadcasters are
at a competitive disadvantage against other information and
entertainment providers clearly would not serve the public interest.
Like any industry, radio has to adapt to the changes in the
marketplace. We are embracing new technologies and new plans to remain
relevant in our local communities for decades to come. We are embracing
the future by investing significant financial and human resources in
new technologies, including high definition digital radio or, HD Radio,
and Internet streaming, so that we can continue to compete in a digital
marketplace and improve our service to local communities and listeners.
All we ask is that the policies you adopt here in Washington recognize
the reality that we face. Let us embrace the future--resist the calls
of those who would embalm us in the past.
XM and Sirius Merger
This Committee has held a hearing and heard perspectives on the
proposed merger of XM Radio and Sirius Satellite Radio. We'd like to
thank the many Members of Congress who have opposed this proposed
merger-to-monopoly. A monopoly in satellite radio would clearly harm
consumers by inviting subscription price increases, stifling innovation
and reducing program diversity. This monopoly would jeopardize the
valuable free over-the-air, advertiser-supported services provided by
local radio stations and their ability to serve local communities and
audiences. All local stations ask is for a fair opportunity to compete
in today's digital marketplace on a level playing field.
Low Power FM Stations
Let me focus for a minute on another subject that I am sure you
will hear about today--Low Power FM (LPFM) broadcasting. I will speak
about two issues: the relationship between LPFM and full power FM
service and the relationship between LPFM and FM translators.
Regarding the former, local broadcasters oppose S. 1675, the Local
Community Radio Act of 2007. We believe this legislation would allow
the FCC to license thousands of micro-radio stations that will cause
harmful interference to full power FM radio stations providing valuable
services to local communities and listeners. The proposed bill is based
on the results of a well-intentioned, but fatally flawed study intended
to determine the amount of interference these new micro-radio stations
would cause. That study, however, was deficient in its methodology,
implementation and analysis of results in assessing the need for third
adjacent channel interference protection.
To the contrary, multiple studies commissioned by NAB, the Consumer
Electronics Association and others have all independently concluded
that removal of the current adjacent channel protections is not
practical because receivers will not be able to adequately reject the
undesired signals that would be created.
Today, under its current policy, the FCC has licensed over 811 LPFM
stations around the country, and with many additional granted
construction permits and applications still pending at the FCC.
Broadcasters have encouraged the FCC to act on any pending LPFM
applications and facilitate those that have received construction
permits. Clearly, there is already an efficient process in place for
LPFM stations to be licensed and to operate within the current third
adjacent protection policy that all stations, both low power and full
power, must follow.
To be clear, local broadcasters do not oppose the licensing of LPFM
stations. However, we do oppose the introduction of thousands of micro-
radio stations that would cause significant harmful interference to
existing full power FM radio stations. Third adjacent protection for
all broadcasters exists for a reason--to guard against interference and
to protect our lifeline service to communities.
Reducing interference protection for subsequently-authorized full
power FM service could also deny thousands of listeners the benefits of
FM station upgrades or new FM services, including digital radio. Often
lost amid the clamor for more LPFM stations is the fact that full power
FM stations provide vast amounts of community-responsive public
service. FM stations are a primary source for local news and
information, political discourse, music programming in a wide variety
of formats and emergency information. And these valuable services will
only increase in the future, as more stations convert to digital and
offer CD-quality audio, additional free programming streams and new
services such as datacasting.
We believe that, instead of risking significant interference to
full power local FM stations, government should focus its efforts on
creating constructive means by which an operating LPFM station that is
displaced by new or upgraded full power FM service can be relocated
without creating harmful interference. Such means could include
granting the displaced LPFM station priority and expedited processing
over other LPFM applications without the need for opening an
application window. Indeed, the FCC has already granted such
displacement relief in the context of low power television, and given
the minimal number of LPFM stations in this situation, we would
encourage that this type of relief be examined first, before other more
problematic avenues are explored.
With regard to FM translators, local broadcasters do not favor an
approach where LPFM stations are granted preferential treatment over FM
translators. Since the FCC first authorized FM translators in 1970 as a
means of delivering radio service to areas and populations that were
unable to receive FM signals because of distance and terrain obstacles,
translators have proven to be a vital component for delivering
essential news, weather, emergency information and AMBER Alerts, as
well as entertainment to many communities.
The FCC's current system of assigning FM frequencies on a first-
come first-served basis has worked well, and there is no reason to
think it will not continue to work well in the future. Affording
preferential treatment to new LPFM stations would jeopardize FM
stations' delivery of important, locally-oriented programming to many
parts of the country via FM translators.
Broadcasters have also urged the FCC to lift the freeze on pending
FM translator applications and quickly process these applications. In
2003, the FCC imposed a freeze on the processing of FM translator
applications presumably because granting translator licenses might
adversely affect the licensing of future LPFM stations. Nothing could
be farther from the truth, however. LPFM and translators are not
mutually exclusive and both can be viable services alongside each
other.
As mentioned, broadcasters do not oppose the licensing of LPFM
stations. We recognize that some of these stations may provide niche
programming to local communities. However, that does not diminish the
fact that FM translators are important tools that local full power
broadcasters need to provide a full complement of diverse, quality
programming to listeners throughout the country, especially in remote
areas. The FCC has explicitly recognized that translators ``provide an
opportunity to import programming formats otherwise unavailable'' in
local markets. In this light, the valuable service that translators
provide should be recognized and fostered.
In sum, there is no demonstrated need for a change in regulatory
priority status between LPFM stations and FM translators. Pending
applications for FM translators have not impeded the FCC's ability to
process LPFM applications under the existing rules. Moreover, to the
extent that parties are urging Congress to change the law to enable
LPFM stations to be placed on channels spaced third adjacent to full
power FM stations, we would strongly encourage Congress to reject these
calls.
Internet Streaming
Let me turn now to the issue of Internet streaming. A few moments
ago, I mentioned Internet streaming as one way broadcasters can adapt
their traditional business models to include new technologies that
complement local free over-the-air radio. Unfortunately, current
conditions make this difficult. Broadcasters are required to pay sound
recording performance fees when they stream their signals on the
Internet. However, the most recent rates set by the Copyright Royalty
Board (CRB) for these fees are so high that a viable business model for
simulcast streaming is almost impossible. The increase in the sound
recording performance fees over the next 4 years established by the CRB
is unreasonable and debilitating to growing this exciting new service.
There are numerous and serious flaws in the CRB's decision, but let me
mention just two of them. First, the CRB gave no credit to radio
broadcasters for the tremendous promotional value we provide to the
recording companies and artists. This is a major factor in record sales
and revenues from concerts. Second, the CRB based the rates it
established on rates paid to the recording industry by interactive
webcasting services that provide the ability to purchase recordings
online. We believe there are fundamental differences between such
services and the free advertiser-supported services broadcasters
provide.
This subject falls primarily within the purview of the Senate
Judiciary Committee, and thus I will not dwell on it today. It is,
however, very important for the future of radio, so let me briefly
emphasize that the sound recording performance fee for Internet
streaming--and the standard by which it is set--must be reformed. NAB
supports H.R. 2060 and S. 1353 which would vacate the CRB decision,
establish an interim royalty rate structure and change the current
``willing buyer, willing seller'' standard that has been a recipe for
abuse and needlessly inflated royalty rates to levels that are
suffocating radio streaming services. In fact, the ``willing buyer,
willing seller'' standard has given rise to a presumption in favor of
agreements negotiated by the major recording companies, acting under
the antitrust exemption contained in the Copyright Act. The predictable
result has been unreasonably high sound recording fees.
In addition, the conditions imposed on broadcasters that stream
should be modified. The statutory performance license imposed nine
conditions on broadcasters that stream, at least three of which are
wholly incompatible with broadcasters' over-the-air business model. For
example, one condition prohibits the playing of any three tracks from
the same album within a three-hour period. Another condition prohibits
DJs from ``pre-announcing'' songs, and a third requires the
transmitting entity to use a player that displays in textual data the
name of the sound recording, the featured artist and the name of the
source phonorecord as it is being performed. These conditions are
designed to prevent copying of sound recordings from distribution
mechanisms far different than radio. Radio stations should not be
forced to choose between either radically altering their over-the-air
programming practices or risking uncertain and costly copyright
infringement litigation.
Performance Tax
On a related subject, let me address the efforts of the recording
industry to convince Congress to impose a new levy on local
broadcasters, in the form of an additional fee for playing recorded
music on free, over-the-air radio. The imposition of such a performance
tax would be inequitable and unfair to radio broadcasters, and could
substantially harm our ability to serve our local communities.
Radio broadcasters already contribute substantially to the United
States' complex and carefully balanced music licensing system, a system
which has evolved over many decades and has enabled the U.S. to produce
the strongest music, recording and broadcasting industries in the
world. For more than 80 years, Congress, for a number of very good
reasons, has rejected repeated calls by the recording industry to
impose a tax on the public performance of sound recordings that would
upset this balance. There is no reason to change this carefully
considered and mutually beneficial policy at this time.
As we noted in NAB's July 2007 testimony before the House Judiciary
Subcommittee on Courts, the Internet and Intellectual Property, the
recording industry's pursuit of a performance tax at this time appears
from losses that result in part from illegal peer-to-peer sharing of
sound recordings, and in part from the loss of revenues from the sale
of recorded music and an inability of record companies to timely adapt
to rapid developments in digital technology and consumer demands.
Broadcasters are not responsible for either one of these phenomena,
and, particularly in the current highly competitive environment, it
makes little sense to siphon revenues from local broadcasters to
support international record labels.
For decades, radio broadcasters have substantially compensated the
music and recording industries, including making annual payments of
hundreds of millions of dollars in fees to music composers and
publishers through ASCAP, BMI and SESAC and providing record labels and
artists with free promotion of their recordings and concerts. Local
radio stations have been the driving force behind record sales in this
country for generations. Music producers and publishers receive royalty
payments from producers of sound recordings who record their works, but
those sums are small relative to the receipts by the record companies
and artists who receive the vast majority of their revenues from the
sale of sound recordings. In fact, the recording industry enjoys
tremendous promotional value from radio airplay. From recording
industry executives:
``I have yet to see the big reaction you want to see to a
hit until it goes on the radio. I'm a big, big fan of
radio.''--Richard Palmese, Executive Vice President of
Promotion RCA (2007)
``It's still the biggest way to break a band or sell
records: airplay. It's very difficult to get it, but when it
happens, it's amazing.''--Erv Karwelis, Idol Records (2007)
``Radio has proven itself time and time again to be the
biggest vehicle to expose new music.''--Ken Lane, Senior Vice
President for Promotion, Island Def Jam Music Group (2005)
``It is clearly the number one way that we're getting our
music exposed. Nothing else affects retail sales the way
terrestrial radio does.''--Tom Biery, Senior Vice President for
Promotion, Warner Bros. Records (2005)
``If a song's not on the radio, it'll never sell.''--Mark
Wright, Senior Vice President, MCA Records (2001)
Throughout the history of the debate over sound recording
copyrights, Congress has consistently recognized the important and very
significant promotional benefit from the exposure by radio stations, as
well as the fact that placing burdensome restrictions on performances
could alter that relationship, to the detriment of the music, sound
recording and broadcasting industries. For that reason, in the 1920s
and for five decades following, Congress regularly considered proposals
to grant copyright rights in sound recordings, but repeatedly rejected
such proposals.
When Congress first afforded limited copyright protection to sound
recordings in 1971, it prohibited only unauthorized reproduction and
distribution of records, but did not create a sound recording
performance fee. During the comprehensive revision of the Copyright Act
in 1976, Congress again considered, but rejected, granting a sound
recording performance fee. Congress continued to refuse to provide any
sound recording performance fee for another twenty years, not
withstanding a plea by the recording industry in the early 1990s that
it do so. During that time, the recording industry thrived, due in
large measure to the promotional value of radio performances of their
records.\2\
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\2\ See, e.g., S. Rep. No. 93-983, at 225-26 (1974) (``The
financial success of recording companies and artists who contract with
these companies is directly related to the volume of record sales,
which, in turn, depends in great measure on the promotion efforts of
broadcasters.'').
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It was not until the Digital Performance Rights in Sound Recordings
Act of 1995 (DPRA) that even a limited performance fee in sound
recordings was created. In granting this limited right, Congress stated
it ``should do nothing to change or jeopardize the mutually beneficial
economic relationship between the recording and traditional
broadcasting industries.'' \3\ As explained in the Senate Report
accompanying the bill, ``[t]he underlying rationale for creation of
this limited right is grounded in the way the market for prerecorded
music has developed, and the potential impact on that market posed by
subscriptions and interactive services--but not by broadcasting and
related transmissions.'' \4\
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\3\ S. Rep. No. 104-129, at 15 (``1995 Senate Report''); accord,
id. at 13 (Congress sought to ensure that extensions of copyright
protection in favor of the recording industry did not ``upset[] the
long-standing business relationships among record producers and
performers, music composers and publishers and broadcasters that have
served all of these industries well for decades.'').
\4\ Id. at 17.
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Consistent with Congress' intent, the DPRA expressly did not
include a sound recording performance fee for non-subscription, non-
interactive transmissions, including ``non-subscription broadcast
transmission[s]''--transmission[s] made by FCC licensed radio
broadcasters.\5\ Congress made clear that the reason radio broadcasting
was not subject to this new limited fee was to preserve the historical,
mutually beneficial relationship among recording companies, radio
stations and music composers:
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\5\ 17 U.S.C. 114(d)(1)(A).
The Committee, in reviewing the record before it and the goals
of this legislation, recognizes that the sale of many sound
recordings and careers of many performers have benefited
considerably from airplay and other promotional activities
provided by both noncommercial and advertiser-supported, free
over-the-air broadcasting. The Committee also recognizes that
the radio industry has grown and prospered with the
availability and use of prerecorded music. This legislation
should do nothing to change or jeopardize the mutually
beneficial economic relationship between the recording and
traditional broadcasting industries.\6\
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\6\ 1995 Senate Report, at 15.
The Senate Report similarly confirmed that ``[i]t is the
Committee's intent to provide copyright holders of sound recordings
with the ability to control the distribution of their product by
digital transmissions, without hampering the arrival of new
technologies, and without imposing new and unreasonable burdens on
radio and television broadcasters, which often promote, and appear to
pose no threat to, the distribution of sound recordings.'' \7\
---------------------------------------------------------------------------
\7\ Id.
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Proponents of a performance tax for sound recordings in the U.S.
often point to the laws of foreign jurisdictions to justify imposing
such an additional fee on local radio broadcasters. This argument
ignores key differences in the American industry structure, and
simplistic comparisons using isolated provisions of foreign laws yield
misleading results. For example, many foreign legal systems deny
protection to sound recordings as works of ``authorship,'' while
affording producers and performers a measure of protection under so-
called ``neighboring rights'' schemes. While that protection may be
more generous in some respects than sound recording copyright in the
U.S., including the right to collect royalties in connection with
public performances, it is distinctly less generous in others.
Additionally, in many neighboring rights jurisdictions the number of
years sound recordings are protected is much shorter than under U.S.
law. Further, broadcast systems in many other countries that have a
performance tax are, or have been, owned or heavily subsidized by the
government and have cultural and social mandates accompanied by content
requirements.
The recording industry's legitimate difficulties with piracy and
its failure to adjust to the public's changing patterns and habits in
how it chooses to acquire sound recordings was not a problem created by
broadcasters, and broadcasters should not be required, through a tax or
fee, to provide a new funding source to make up for lost revenues of
the record companies. Indeed, the imposition of such a tax could create
the perverse result of less music being played on radio or a weakened
radio industry. For example, to save money or avoid the tax, stations
could cut back on the amount of pre-recorded music they play or change
formats to all-talk, providing less exposure to music. This could not
only adversely impact the recording industry, but the music composers
and publishers as well. A performance tax would have a particularly
adverse impact on radio stations in small and medium-sized markets that
are already struggling financially. Were such additional royalties
imposed, in the face of competition from other media, many of these
stations would have to spend more time in search of off-setting
revenues that could affect the time available for public service
announcements for charities and other worthy causes, coverage of local
news and public affairs and other valuable programming.
With respect to the performance of sound recordings on over-the-air
broadcasting, NAB urges the Committee to recognize that a new
performance tax on broadcasters is neither warranted nor equitable. The
frustrations of the recording industry in its inability to deal with
piracy and an outdated business model are not sufficient justification
for imposing a wealth transfer at the expense of the American broadcast
industry, which has been instrumental in creating hit after hit for
record labels and artists and whose significant contributions to the
music and recording industries have been consistently recognized by
Congress over the decades.
In conclusion, I firmly believe that the future of free over-the-
air radio broadcasting is bright. Our commitment to our local
communities, coupled with the momentum for consumers to realize the
benefits of HD Radio, will propel our industry forward. But to do so,
we must remain free from interference in our signals and from
regulations that will hamper our ability to serve our local listeners.
We look forward to working with this Committee and are happy to answer
any questions you may have.
Senator Cantwell. Thank you, Mr. Withers for your
testimony.
And Mr. Westergren, before you start, I'm going to allow
the Chairman, Chairman Inouye, to make an opening statement.
STATEMENT OF HON. DANIEL K. INOUYE,
U.S. SENATOR FROM HAWAII
The Chairman. I thank you very much. I'd like to commend
Senator Cantwell for taking the leadership in this area on
radio. I suppose radio is not as sexy as Internet, or the other
high-tech matters before us. I recall, as a child, I was
brought up on the radio. I knew what time the fishes were
running, I knew what time was best to surf. But today, with all
of the consolidation, I wonder if less local news will be the
result. I'm not suggesting it should all be local, but, I'm
nostalgic, that's all.
There are many issues before us, and I'm so happy that
Senator Cantwell has come out with this bill. And so, we're
looking to the future, and we're asking your help, because
frankly there are so many things happening, we don't know where
to go.
I was one of the authors of the 1996 Act, at that time if
you would search the text of the bill, you will find the word
``Internet'' appearing three times. That's how important it
was--just three times out of thousands of words.
Today, everywhere you go, it's the Internet.
So, with that, thank you very much.
Senator Cantwell. Thank you, Mr. Chairman for those
comments, and the Chairman was referring to the legislation
that we've introduced again on Low Power FM radio.
Senator Snowe, did you wish to make an opening statement at
this time?
STATEMENT OF HON. OLYMPIA J. SNOWE,
U.S. SENATOR FROM MAINE
Senator Snowe. I do have one, and I ask unanimous consent
to submit it for the record.
Senator Cantwell. Without objection.
[The prepared statement of Senator Snowe follows:]
Prepared Statement of Hon. Olympia J. Snowe, U.S. Senator from Maine
Thank you, Mr. Chairman, for holding this hearing on the state of
the radio industry. Even with the advent of new media, radio still
plays a crucial role in our lives and while most of the attention has
been toward Internet and broadband innovation as well as the DTV
transition, radio too has seen it's share of impressive advancements.
Radio is one of, if not, the most reliable form of communication
today. Oftentimes during natural disasters and other emergencies, many
forms of communications become unavailable to the public but over-the-
air radio is a ubiquitous form of mass media that is available to
nearly every car and household in the Nation. The system cannot be
overloaded and operates well under extreme weather conditions. Radio
has been meeting the demands of local communities for nearly a century
and is equipped to continue its service well into the next century.
To meet that service, radio has evolved with the introduction of
satellite, Internet, and even hybrid-digital or ``HD'' radio. The birth
of satellite radio less than a decade ago has been a boon to consumers
looking for increased variety in music, sports and talk programming.
Never before have consumers had access to over one hundred streams of
programming in a radio service. Satellite radio has served its niche
well.
Internet radio has also seen an amazing growth in popularity. Just
last year Internet radio listening jumped dramatically, from 45 million
listeners to 72 million listeners per month and more than seven million
Americans listen to Internet radio every day. The SHOUTcast radio
website, which enables users to ``tune-in'' to thousands of online
radio stations around the world, has access to approximately 21,000
online radio stations.
But probably the most significant advancement in radio broadcasting
since the introduction of FM stereo more than 50 years ago has been
``HD'' radio. HD Radio technology enables AM and FM radio stations to
broadcast their programs digitally an in doing so greatly improving
audio quality for its listeners--FM radio achieves near CD-quality
sound. Digital signals are also less vulnerable to reception problems
and eliminate the static, pops, hisses, and fades caused by
interference. More than 1,500 radio stations are currently broadcasting
in HD.
But with all this innovation there are areas that we should
investigate further. We must look at how we can promote minority and
women ownership within media. Currently only 6 percent of full-power
commercial broadcast radio stations are owned by women and 7.7 percent
are owned by minorities. But yet for general, non-farm business, women
and minorities account for 28 and 18 percent ownership, respectively.
The FCC has reported that nearly all of the broadcast stations with
majority women and/or minority ownership are located in rural areas and
small towns.
The FCC is currently conducting six field hearings on media
ownership and also held a hearing specifically on localism in my state
of Maine. It was recently confirmed that the FCC Chairman has told the
other Commissioners he wants to propose revised media ownership rules
by November 13, provide a 28-day period for public comment, and vote on
new rules on December 18.
It is my belief that the 28-day comment period Chairman Martin is
suggesting is inadequate for comprehensive public evaluation and
comment for such a critical issue. That is why I have joined my
colleagues Senators Dorgan and Lott to call for a committee hearing on
this issue so that we can examine it further and get a better
understanding of what direction the Commission plans to take.
I look forward to hearing from our distinguished panels on this and
other matters pertaining to the radio market.
Thank you, Mr. Chairman.
Senator Cantwell. So, Mr. Westergren, if you could re-start
the testimony from the panel, thank you very much.
STATEMENT OF TIM WESTERGREN, FOUNDER AND CHIEF STRATEGY
OFFICER, PANDORA MEDIA; ON BEHALF OF THE DIGITAL MEDIA
ASSOCIATION
Mr. Westergren. Chairman Inouye and Members of the
Committee, on behalf of Pandora, the Digital Media Association,
and Internet radio industry, thank you for inviting me to speak
about the future of radio.
Today I will discuss how Pandora and Internet radio
innovation offers unique benefits to listeners and artists, and
I will ask your help as we confront our royalty crisis that
threatens our innovative company, and our industry.
Pandora, a company I founded after 10 years as a working
musician, is radio that listeners enjoy on their personal
computers, their home stereos, and on mobile phones. Pandora is
the third-largest Internet radio service in America, with
nearly 9 million registered listeners.
Pandora is unique, because when you type in a song or
artist you like, we instantly provide a radio station that you
are certain to enjoy. We can do that because our programming is
based on a sophisticated analytical tool called the ``Music
Genome Project.'' Hundreds of musical attributes have been
identified by our musicologists, and then used to analyze every
song in our database.
The Music Genome Project connects the dots between songs
and artists, and the results are dramatic. Listeners enjoy
radio with more music they like, and more new music they
discover. Artists compete for listeners on a level playing
field. Once in our database, a song will play on suitable
stations, depending only on musical relevance and listener
feedback. Being famous or having a big marketing budget won't
change a thing.
Every month we add roughly 14,000 songs to our database,
which now includes several hundred thousand songs by more than
35 artists. More than 70 percent of our recordings, and 50
percent of our performances are by so-called ``Indie'' artists,
unaffiliated with a major record label.
As an example, on Mac's record label, his songs have spun
over 25 million times. This compares to less than 10 percent of
Indie music on broadcast radio. To listeners, Internet radio is
looking more and more like broadcast and satellite radio.
We are listening to a live Pandora radio transmitting over
Sprint's cell phone network. This $2 connector can also plug
into your home stereo or car stereo so media convergence is
well underway.
Sorry, that was a little loud.
Senator Cantwell. I don't know, it was pretty good.
Mr. Westergren. Ella Fitzgerald.
But Internet radio is much more powerful. Rather than
playing several stations for thousands or millions of
listeners, the Internet can accommodate hundreds of thousands
of simultaneous channels, allowing unlimited diversity, so
listeners can hear music they are certain to enjoy, and
discover new songs and artists that would otherwise be
invisible to them. Musicians who cannot get airplay on
broadcast radio have found a home and an audience on Internet
radio--jazz, big band, klezmer, lute music--the list goes on.
Internet radio also offers listeners the opportunity to
immediately buy music or concert tickets, and they do. Pandora
is a leading referral site for music purchasing, for both
Amazon.com and the iTunes Music Store, and a recent study found
that Pandora listeners are three to five times more likely to
purchase music than the average American.
But Pandora and Internet radio face early extinction,
because the Copyright Royalty Board recently imposed absurdly
high royalties on our industry.
For example, in 2007, Pandora would pay royalties of nearly
50 percent of our revenue, and the rate increases by more than
25 percent in 2008, and again in 2009. In contrast, broadcast
radio pays zero sound recording royalties. Satellite radio pays
less than 3 percent of its revenue, and cable radio pays 7\1/4\
percent.
I am proud that in 2006, Pandora paid more than $2 million
in royalties. But in 2007, our invoice will exceed $6 million.
The CRB ruling has rendered our business and the entire
business economically unsustainable.
After the CRB decision, Pandora joined the SaveNet Radio
campaign, and together with several million Internet radio
listeners and more than 6,000 artists, Pandora supporters have
been calling Congress, and urging support for Internet radio.
We thank Senators Kerry and Dorgan for cosponsoring the
Internet Radio Equality Act, which would resolve this crisis by
setting Internet radio royalties at a reasonable 7.5 percent of
revenue.
Today, we remain hopeful that the CRB royalty decision will
be remedied through Congressional or judicial action, or
through negotiation. But the moment we believe otherwise, is
the moment we close down our company, lay off 117 employees,
and disappoint millions of listeners, and many thousands of
recording artists.
As a musician, I am heartbroken at the prospect of
silencing Internet radio, an extraordinary resource that offers
artists a wonderful promotional platform. As a listener, I am
depressed at possibly losing the most powerful music discovery
tool ever created, and as a webcaster, I am dismayed at the
prospect of telling 9 million listeners that their radio
stations are dead.
Everyone at Pandora, and the Internet radio industry wants
artists to be paid fairly, but we also want Internet radio to
survive, and that will not happen unless the CRB royalty
decision is remedied.
Thank you.
[The prepared statement of Mr. Westergren follows:]
Prepared Statement of Tim Westergren, Founder and Chief Strategy
Officer, Pandora Media; on Behalf of the Digital Media Association
Chairman Inouye, Vice Chairman Stevens, and members of the
Committee:
My name is Tim Westergren. I am the Founder and Chief Strategy
Officer of Pandora, and it is my pleasure today to speak with you on
behalf of my company and the Digital Media Association (``DiMA''),
about the radio industry, and particularly about innovation and the
future of radio.
What is Pandora?
Pandora is an Internet radio service that listeners enjoy on their
personal computers, through home entertainment products and on mobile
phones. Pandora is powered by a very unique musical taxonomy, called
the Music Genome Project, developed by our team of university-degreed
musicologists. Our team has identified hundreds of musical attributes
and they assign values to each attribute in each song. When applied
across a repertoire of hundreds of thousands of songs, the Music Genome
Project literally connects the dots between songs and artists that have
something--often quite subtle things--in common. This is the foundation
that enables Pandora to offer listeners--quickly and easily--radio
stations that play music that matches their taste if the listener
simply tells us the name of a favorite song or artist.
The result is remarkable in many ways. More than 8.5 million
registered Pandora listeners enjoy a better radio experience, and they
are passionate about our service. They listen to more music, they re-
engage with their music, and they find new artists whose recordings
they purchase and whose performances they attend. Pandora is a bit of a
phenom--in only 2 years since our launch we have become the third
largest Internet radio service in America. But the real winners are
music fans, artists, record companies, songwriters and music
publishers.
Something unique about Pandora is that all music, once analyzed by
our musicologists and entered into our database, wins and loses
audience in the purest of democratic processes. If listeners vote
``thumbs up'' a song and artist are electronically added to more
station playlists, the exposure is greater, and more people can offer
opinions about that music. If listeners consistently vote ``thumbs
down'' then the song is performed and heard less. Not even my musical
tastes or the CEO's favorites can modify the purity of how our musical
taxonomy determines all Pandora radio performances.
Equally unique is the breadth of our playlist. Pandora
musicologists will review any CD that is delivered to us, and in most
cases enter it into our database and make it available for our millions
of listeners to hear. Pandora's collection includes hundreds of
thousands of songs across the genres of Pop, Rock, Jazz, Electronica,
Hip Hop, Country, Blues, R&B, Latin and in just a few weeks, Classical.
These recordings range from the most popular artists to the completely
obscure, and each month our nearly fifty musicologists analyze and add
roughly 14,000 new songs to the catalogue--a very deliberate process
that requires between 15 and 30 minutes per song.
There are no prerequisites for inclusion in the Music Genome
Project. Indeed, it is quite common for us to add amateur homemade CDs
to the service. As a card-carrying independent musician I am proud to
report that fully 70 percent of the sound recordings in our collection,
representing over 35,000 artists, are recordings of artists who are not
affiliated with a major record label. Most important, because we rely
only on musical relevance to connect songs and create radio playlists,
all artists are treated equally in the playlist selection process and
as a result independent music is likely heard more on Pandora then
perhaps any other popular radio service. More than 50 percent of
Pandora radio performances are from independent musicians, compared to
less than 10 percent on broadcast radio.
What qualities are unique about ``new media'' radio, and what benefits
are associated with those qualities?
In one sense multimedia convergence has already blurred the line
between traditional `terrestrial radio', Internet radio, mobile radio,
cable radio, satellite radio and even community radio. For example:
Your mobile phone today can transmit a ``webcast'', and with
a $2 adaptor you can listen to that Internet radio through your
car stereo.
You can start a ``community'' radio station on the Internet
and while content is focused locally, an audience is available
(and may actually listen) globally.
Your car stereo today comes pre-loaded with AM/FM and
perhaps XM, but in only a few years cars will have WiMAX
broadband access and you will be able to enjoy Internet radio
directly and throw away the adaptor I just spoke of.
To a listener who is hearing a single station at a given time, it
is just radio and their choices are amazing--which content do I want to
hear, when do I want to hear it, and on what device?
But in another sense, Internet radio is uniquely different from
broadcast, satellite and even low-power FM radio, because on the web
there are virtually no spectrum limitations and therefore no capacity
or scarcity issues. As a result, Internet radio offers almost unlimited
``stations'' which results in unlimited content diversity.
For music fans, Internet radio means no longer being confined to
local or even satellite stations playing homogenous music for broad
audiences of thousands or tens of thousands of listeners. Instead,
individuals can hear the types of music they enjoy and simultaneously
discover new songs and artists that would otherwise be literally
invisible to them. Unconstrained by spectrum limitations, webcasting
has created a genuine explosion of accessible musical diversity. Lute
music, classic country, jazz, klezmer, dixie, gospel, Latin and
Hawaiian music--you name it and you can find it--every kind and color
of music has found a home and connected with its audience, no matter
how small, on the Internet.
Another unique feature of Internet radio is click-to-buy purchasing
opportunities, and immediate access to artist information, including
the artist's promotional website and tour schedule. Pandora is a
powerful platform for recording companies and artists during this
tumultuous period for recorded music. An August 2007 Nielsen/NetRatings
research study concluded that Pandora listeners are three to five times
more likely to have purchased music in the last 90 days than the
average American. Similarly, Pandora is one of the top referral sites
for music purchasing from both Amazon.com and the iTunes Music Store.
Other studies have documented that Internet radio listeners are
generally more engaged with music, they talk about it more and attend
more performances, and they inevitably promote artists and music
through word-of-mouth marketing.
Finally, of course, there is the issue of royalties to performers
and recording companies. As you know, traditional broadcasters do not
pay royalties but the rest of us--cable, satellite and Internet radio--
do pay. You may not be aware that Internet radio has the smallest of
all radio revenue streams, but we pay proportionately the highest
royalties.
I am proud that in 2006 Pandora paid more than $2 million in
royalties to artists and recording companies, and had the old royalties
rates stayed in effect, then in 2007 we would be on track to pay over
$4 million. Instead, unfortunately, the Copyright Royalty Board
recently increased royalty rates more than 30 percent so our royalty in
2007 is now likely to reach over $6 million, almost 50 percent of our
total revenue. And per listener per track royalty rates for Internet
radio are scheduled to climb an additional 27 percent in 2008, and 29
percent more in 2009.
Under the CRB decision Internet music radio is economically
unsustainable; it is not even a close call. Pandora has skyrocketed
from a standing start to millions of listeners in 2 years; we were
getting within sight of cash-flow positive operations under the old
rates, but now we are back under water with no hope of ever emerging as
the royalty rates continue to increase. Of course our disappointment is
magnified because our broadcast and satellite competitors enjoy no
royalties or very reasonable royalties, respectively.
It is for these reasons that Pandora and the entire Internet radio
industry thank Senators Kerry and Dorgan for cosponsoring the Internet
Radio Equality Act, S. 1353, which would resolve this industry crisis
by reversing the Copyright Royalty Board's recent rate-setting decision
and set royalties at a reasonable 7.5 percent of revenue--higher than
that paid by any U.S.-based radio service and higher than the average
royalties in Europe that the recording industry references as the
bastion of sound recording performance royalty fairness.
In the starkest possible terms, the Committee and the Congress
should be aware that Pandora and the entire Internet music radio
industry cannot afford the CRB royalty rates. Today, we still are
hopeful and we believe that some combination of Congress, the courts,
or a negotiated resolution with SoundExchange will favorably resolve
this threat. But if we conclude that the CRB royalty rates are not
going to be rectified, Pandora would shut down immediately.
Congress should also understand that Pandora and our DiMA
colleagues are not alone in our effort to reverse this unfair CRB
royalty decision. Since the SaveNetRadio campaign began several hundred
thousand people have contacted Congress and urged support for Internet
radio and more than 6,000 artists have joined the effort in support of
the Internet Radio Equality Act and more reasonable royalties for
artists and recording companies. Everyone in the Coalition wants
artists to be paid fairly and supports the growth of Internet radio
which directly and indirectly benefits tens of thousands of working
artists. But without reduced royalties there is simply no way for
Pandora, or any other webcaster, to remain in business.
* * * * * * *
In just 10 years more than 70 million listeners have flocked to
Internet radio, a virtual fountain of music discovery. Many of our
listeners are returning to radio after years of exile spent listening
to the same CDs they bought in college, or not listening to music at
all. And musicians are back in business also, as they can now find fans
and build community with people who want to buy their music and want to
attend their performances. The Internet continues to be a remarkable
democratizing force for creativity and innovation.
It has been a wonderful experience to watch our service grow and to
witness our listeners' passion and enthusiasm as they have rediscovered
their love of music. I am Pandora's traveling minstrel, and in the last
18 months I have visited almost 100 different towns and cities meeting
in ``town hall''-style with Pandora listeners. From Biloxi and Baton
Rouge to Seattle and San Francisco I have met with tens and often
hundreds of listeners at each meeting and enjoyed the energy of
enthusiastic music fans and musicians who are re-engaged and re-
committed to their music and their newfound radio experience.
As a former performing musician and composer, it is exciting to be
at the dawn of a new renaissance for musicians, who are empowered with
new ways to market their music and successfully develop a fan base. I
often wish I could start my band now instead of back in the early
nineties when our resources were a van, a staple gun and a pile of
flyers that we handed out or stapled to telephone poles.
It is my hope, indeed the reason I started this company, that we
are at the beginning of the development of a musicians' middle class,
as radio services like Pandora allow musicians to find a fan base and
maintain a steady career making music, which is a real alternative to
the major-label system that makes you an enormous star or leaves you
unemployed. These e-mails from Pandora listeners testify to this new
era for independent musicians:
``I think the best thing you've done is introduced me to so
many artists that I love but would have never known that they
existed otherwise. Now I buy their albums and look for upcoming
shows in my area. You've done the music industry a great
service from what I can tell.''
``Let me tell you that you are a blessing in my life. I'm 77
years old and the music I like and grew up with just isn't
played much any more. Sometimes tears come to my eyes when I
hear certain songs. They bring back so many memories. I don't
think I have heard any songs I haven't liked. Thank you from
the bottom of my heart. I send you arms full of appreciation.''
And from a musician:
``Hi guys--just wanted to thank you for putting my music into
your system. I have had sales all over the U.S. from people who
found me via your site. Pandora is great. I use it all the
time. And I can't believe what a promotional tool it has become
for my own music.''
Since 1999 Pandora has survived the dot-com collapse thanks to more
than 30 employees who worked months without salaries, and we are now
one of the largest payors of sound recording performance rights in this
great Nation. We employ more than 100 people, most of whom are trained
and experienced musicians and most of whom work at our headquarters in
an enterprise zone in Oakland, California. We have invested; we have
innovated; and we have had some very good initial success. Please
support resolution of the Internet radio royalty crisis by cosponsoring
the Internet Radio Equality Act so our industry can continue to grow,
and continue to benefit artists by paying fair royalties and developing
new audiences.
As a musician who spent a decade walking in the shoes of the
working artist, I am heartbroken at the prospect of silencing what has
become an extraordinary resource for the artist community. As a
listener and music lover, I am depressed at the prospect of losing the
most powerful music discovery tool ever put in the hands of music
lovers. And as a webcaster, I am dismayed at the prospect of telling
millions of devoted listeners that their radio stations are dead.
Thank you for your time and consideration.
Senator Cantwell. Thank you, Mr. Westergren for the
testimony and for the demonstration, we appreciate that. It's
not every day we get a media demonstration.
Mr. Turner, if you'd like to give your statement?
STATEMENT OF S. DEREK TURNER, RESEARCH DIRECTOR,
FREE PRESS; ON BEHALF OF CONSUMERS UNION,
CONSUMER FEDERATION OF AMERICA
Mr. Turner. Madam Chair, Chairman Inouye, and Members of
the Committee, I thank you for the opportunity to testify today
on the important issues surrounding the future of radio.
I'm the Research Director for Free Press, a public interest
organization dedicated to public education and consumer
advocacy on communications policy.
Even in today's multimedia world, broadcast radio remains
one of the most powerful media in our daily lives. Well over 90
percent of Americans tune to the radio each week, for an
average of 19 hours a week.
New technologies like HD Radio and Internet simulcasting
hold great promise for the future of this industry, as do
changing demographics.
For example, while total time spent listening to radio has
stagnated for the general population, it has actually increased
substantially among African-Americans and Latinos, and it
matters who owns these stations.
In a democracy, the diversity of ownership should reflect
the diversity of the population. Sadly, as my testimony will
show, this is not the case.
The FCC has a statutory obligation to promote ownership
diversity. The Communications Act directs the Commission to,
``avoid excessive concentrations of licenses by disseminating
licenses among a wide variety of applicants, including
businesses owned by women and members of minority groups.''
But the Commission lacks even the most basic understanding
of what actually the true state of female and minority
broadcast ownership is. Now, we can't evaluate the problems
that we don't measure or study, let alone solve them.
This is why my organization, Free Press, took on the task
that the Commission has neglected. Using the Commission's own
data, we found that despite comprising over half of the
population, women in this country own just 6 percent of the
radio stations. Minorities make up a full third of our
population, but own just 7.7 percent of the radio stations, and
the stations that women and minorities own are fundamentally
different. Female and minority owners are more likely to own
just one single station, and are more likely to be local
owners, which fosters a deeper connection to the communities
that they serve.
Now, these characteristics are very important, for they are
the precise characteristics of those owners who are most
vulnerable to the pressures of media consolidation.
The 1996 Telecom Act triggered a wave of consolidation in
the radio industry, by removing the national ownership limit,
and increasing local ownership caps. The impact on ownership
diversity was clear, and it was devastating.
Since 1996, there has been a whopping 40 percent decrease
in the number of owners, even as the number of stations has
increased. In the average local market, just two firms control
74 percent of the market's revenue--a highly concentrated level
by any standard.
Now, how do female and minority owners fare under this wave
of consolidation? Our research demonstrates conclusively and
empirically that more consolidation means less female and
minority ownership. As concentration increases, these single-
station and local owners find it increasingly difficult to
compete against the big radio giants.
Now, I mentioned earlier that the FCC has no idea what the
true state of female and minority broadcast ownership is. This
is not hyperbole. It may be hard to believe, but the Commission
has never conducted an accurate count.
Though the FCC collects information regarding the race,
ethnicity and gender of every broadcast owner, they have done
nothing meaningful with this information. Instead, they have
issued bogus summaries that are deeply flawed.
For example, our research conclusively showed that the
Commission, in its most recent effort, missed over half of the
radio stations owned by women and minorities. In television
they fared far worse, missing over two-thirds of the television
stations owned by women and minorities. This is simply a
shocking testament to the FCC's indifference to the plight of
women and people of color in this country, and it is also an
embarrassing record of neglect and incompetence for a Federal
agency.
How can the Commission conduct any meaningful analysis
regarding the effects of its policies, if it can't even conduct
a basic count of who owns what?
Congress must send a message to the FCC to stop its rush
toward more media consolidation. The Commission needs to first
adequately study the issue of minority ownership, before it
moves forward with any rule changes. And the Commission needs
to complete other related tasks, such as the dormant localism
proceeding, and issue the long-overdue Section 257 report that
Congress requires on the Commission's efforts to promote
ownership diversity.
We also support other measures that increase opportunities
for women and minorities to access the public radio airwaves.
The Local Community Radio Act, sponsored by Senators Cantwell
and McCain, expands Low Power FM and will help create a more
diverse broadcast system and will provide a crucial path to
full ownership by women and people of color.
In closing, ownership rules exist for a reason--to increase
diversity and localism, which in turn produces more diverse
speech, more choices for listeners, and more owners who are
responsive to their local communities.
Thank you, and I look forward to your questions.
[The prepared statement of Mr. Turner follows:]
Prepared Statement of S. Derek Turner, Research Director, Free Press;
on Behalf of Consumers Union, Consumer Federation of America
Summary
Free Press,i Consumers Union,ii and Consumer
Federation of America iii appreciate the opportunity to
testify on the important communications policy issues surrounding the
future of radio. As consumer advocates, we strongly support policies
that will fulfill the goals of the Communications Act ``to make
available . . . to all the people of the United States, without
discrimination on the basis of race, color, religion, national origin,
or sex'' \1\ a media that favors a ``diversity of media voices'',\2\
characterized by ``vigorous economic competition, technological
advancement'',\3\ and one that serves ``the public interest,
convenience, and necessity.'' \4\ Ensuring a vibrant future for radio,
as well as all other communications media, is vital to maintaining our
economic and social well being in addition to our vigorous political
discourse. Our democracy thrives on the dissemination of the widest
possible sources of information, and radio remains one of the most
important conduits for the propagation of local, national and
international news, culture, entertainment and information.
---------------------------------------------------------------------------
\i\ Free Press is a national, nonpartisan organization with over
350,000 members working to increase informed public participation in
media and communications policy debates.
\ii\ Consumers Union is a nonprofit membership organization
chartered in 1936 under the laws of the state of New York to provide
consumers with information, education and counsel about goods,
services, health and personal finance, and to initiate and cooperate
with individual and group efforts to maintain and enhance the quality
of life for consumers. Consumers Union's income is solely derived from
the sale of Consumer Reports, its other publications and from
noncommercial contributions, grants and fees. In addition to reports on
Consumers Union's own product testing, Consumer Reports with more than
5 million paid circulation, regularly, carries articles on health,
product safety, marketplace economics and legislative, judicial and
regulatory actions which affect consumer welfare. Consumers Union's
publications carry no advertising and receive no commercial support.
\iii\ The Consumer Federation of America is the Nation's largest
consumer advocacy group, composed of over 280 state and local
affiliates representing consumer, senior citizen, low-income, labor,
farm, public power and cooperative organizations, with more than 50
million individual members.
\1\ The Communications Act of 1934 (As Amended in 1996), Title I,
Section 1.
\2\ The Communications Act of 1934 (As Amended in 1996), Title II,
Section 257.
\3\ Ibid.
\4\ Ibid.
---------------------------------------------------------------------------
The United States is a diverse melting pot of people and cultures.
In such an environment it is not unreasonable to expect that the
privilege of access to the scarce radio broadcast airwaves be
distributed in a manner that reflects our racial, ethnic and gender
diversity. Unfortunately, this is not the case. Women and people of
color comprise 67 percent of our population, but own just 13 percent of
our Nation's radio stations. This underrepresentation is a national
disgrace and a true crisis for the millions of Americans who lack
representative voices on the public airwaves. Compounding this tragedy
is the simple fact that women and people of color are radio's future.
African American's and Latinos spend 20 percent more of their time
listening to radio than whites, over 22 hours each week. And while
radio listenership has stagnated or declined among whites over the past
decade, it has actually increased among people of color.
Though the Communications Act explicitly directs the Federal
Communications Commission to disseminate ``licenses among a wide
variety of applicants, including . . . businesses owned by members of
minority groups and women'',\5\ our research reveals that the FCC lacks
even the most basic understanding of the current state of female and
minority ownership, and therefore has no basis to assess the impacts of
its broadcast regulatory policies on these underrepresented owners.
---------------------------------------------------------------------------
\5\ The Communications Act of 1934 (As Amended in 1996), Title II,
Section 309(j).
---------------------------------------------------------------------------
Our study, Off The Dial (attached to this testimony as an
appendix),* is to date the only comprehensive assessment of
the state of female and minority radio ownership and the impacts of FCC
regulatory policy. Using the Commission's own data, we have done the
work that the FCC has neglected to do.
---------------------------------------------------------------------------
\*\ This document is retained in the Committee's files and is also
available at http://www.freepress.net/docs/off_the_dial.pdf.
---------------------------------------------------------------------------
The results of this study indicate a perilous state of under-
representation of women and minorities in the ownership of broadcast
media, where two-thirds of the U.S. population has very few stations
representing their communities or serving their needs. The results also
point to massive consolidation and market concentration as one of the
key structural factors keeping women and minorities from accessing the
public airwaves.
We hope that this study reminds policymakers at the FCC and in
Congress that ownership rules that mitigate media market concentration
and consolidation exist for a reason: to increase diversity and
localism in ownership, which in turn produces more diverse speech, more
choice for listeners, and more owners who are responsive to their local
communities and serve the public interest.
The Dismal State of Female and Minority Ownership
We analyzed tens of thousands of pages of official FCC documents to
determine the racial and gender status of the owner of every single
full-power licensed commercial radio station broadcasting in the 50
U.S. states and the District of Columbia--over 10,500 stations in
total. The results from this effort are stark:
Women own just 6 percent of all full-power commercial
broadcast radio stations, even though they comprise 51 percent
of the U.S. population.
Racial or ethnic minorities own just 7.7 percent of all
full-power commercial broadcast radio stations, though they
account for 34 percent of the U.S. population.
Our previous television study, Out of the Picture,\6\ found that
female and minority ownership of broadcast television stations was
similarly anemic. Women own 5 percent of broadcast TV stations, while
people of color own just 3.3 percent of stations.
---------------------------------------------------------------------------
\6\ S. Derek Turner and Mark N. Cooper, Out of the Picture:
Minority and Female TV Station Ownership in the United States, Free
Press, October 2006.
---------------------------------------------------------------------------
These groups' level of radio station ownership is only slightly
higher, despite the fact that the cost of operating a radio station is
dramatically lower than a TV station. Moreover, radio station ownership
is very low compared to the levels seen in other commercial industry
sectors:
According to the most recent figures available, women own 28
percent of all non-farm businesses.
Racial and ethnic minorities owned 18 percent of all non-
farm businesses, according to the most recent data.
We found that women own 10.4 percent of all unique broadcast
businesses (controlling 6 percent of all stations) while
minorities own 10.4 percent of all unique broadcast businesses
(controlling 7.7 percent of all stations).
In sectors such as transportation and healthcare, people of
color own businesses at levels near their proportion of the
general population. But in the commercial radio broadcast
sector the level of minority station ownership is over four
times below their proportion of the general population. That's
lower than every sector of the economy tracked by the Census
Bureau except for mining and enterprise management.
Not only do women and people of color own few stations, but
commercial stations have very few women and minorities at the top--in
the positions of CEO, president or general manager.
Just 4.7 percent of all full-power commercial broadcast
radio stations are owned by an entity with a female CEO or
president.
Only 1 percent of the stations not owned by women are
controlled by an entity with a female CEO or president.
Just 8 percent of all full-power commercial broadcast radio
stations are owned by an entity with a CEO or president who is
a racial or ethnic minority.
Less than 1 percent of stations not owned by people of
color are controlled by an entity with a minority CEO or
president.
However, minority-owned stations are significantly more likely to
be run by a female CEO or president than non-minority-owned stations,
and female-owned stations are significantly more likely to be run by a
minority CEO or president than non-female-owned stations. And both
female-owned and minority-owned stations are significantly more likely
to employ a woman as general manager.
Female and Minority Owners Control Fewer Stations per Owner
Female and minority owners are more likely to own fewer stations
per owner than their white male and corporate counterparts. They are
also more likely to own just a single station.
Of all the unique minority owners, 67.8 percent own just a
single station. However, only 49.6 percent of the unique non-
minority owners are single-station owners.
60.8 percent of the unique female owners are single-station
owners, versus just 50.4 percent of the unique non-female
station owners.
Only 24.4 percent of the unique minority station owners are
group owners--owning stations in multiple markets, or more than
three stations in a single market--compared to 29.5 percent of
non-minority owners.
Just 16.9 percent of female owners are group owners, versus
30.4 percent of non-female owners.
Overall, racial and ethnic minorities own 2.6 stations per
unique owner compared to 3.9 stations owned per unique white,
non-Hispanic owner.
Women own 2.1 stations per unique owner compared to 4.1
stations owned per unique male owner.
Female- and minority-owned stations differ from non-female- and
non-minority-owned stations in other ways as well. For example, women
and people of color are more likely to own less valuable AM stations
and their stations are more likely to be found in larger, more
populated markets.
Female- and Minority-Owned Stations Are More Local, More Often
Localism is supposed to be one of the FCC's key considerations in
crafting media ownership regulations. Local owners, in theory, are more
connected to the communities they serve and thus in a better position
to respond to public needs than absentee owners who reside hundreds or
thousands of miles away.
Our study found that female owners are significantly more likely to
be local station owners.
64.4 percent of all female-owned stations are locally owned,
versus just 41.6 percent of non-female-owned stations.
For minority-owned stations, the relationship is somewhat more
complex because the minority population is more concentrated in certain
areas. Minority-owned stations are more likely to be locally owned than
non-minority-owned stations in larger markets, which have bigger
minority populations.
Among all radio stations, 43 percent of minority-owned
stations are locally owned, the same level as non-minority-
owned stations.
But in Arbitron radio markets (where four out of every
five minority-owned stations are located, and which have
significantly higher minority populations), 38.3 percent of
minority-owned stations are locally owned, versus 29.4
percent of non-minority-owned stations.
Local Ownership of Radio Stations
[by State (2007)]
------------------------------------------------------------------------
Percent of Radio Stations That Are
State Locally Owned
------------------------------------------------------------------------
OK 60.6
TN 58.2
KY 57.0
AL 56.5
MS 54.8
NM 54.7
AR 54.7
ND 54.1
AK 54.0
NE 53.3
ID 52.7
IN 51.2
OR 50.8
GA 49.9
UT 49.4
MN 47.5
MO 47.2
NJ 46.4
NC 46.0
WI 45.9
MT 45.6
WV 45.6
LA 45.3
KS 44.2
IA 42.2
MI 42.0
WY 41.5
WA 41.4
VA 41.3
NH 41.2
SC 40.1
AZ 38.9
PA 38.5
IL 38.0
TX 37.6
OH 36.4
FL 36.0
HI 35.7
MA 35.2
NY 35.0
CT 34.3
RI 33.3
VT 31.5
ME 30.0
CO 29.6
CA 28.3
MD 27.2
SD 26.2
NV 21.1
DE 16.7
DC 0.0
========================================================================
Nationwide 42.9
------------------------------------------------------------------------
In unrated markets (which have significantly lower
minority populations), 56 percent of minority-owned
stations are locally owned, compared to 62.9 percent of
non-minority-owned stations.
Minority Ownership of Radio Stations
[by State (2007)]
------------------------------------------------------------------------
Percent of Radio Stations
State Percent Minority Population That Are Owned by People of
in State Color
------------------------------------------------------------------------
HI 75.43 11.43
DC 68.44 20.00
NM 57.59 8.18
CA 57.21 15.49
TX 51.89 19.15
MD 41.68 17.48
NV 41.36 4.23
GA 41.25 13.15
MS 40.74 14.91
AZ 40.51 7.78
NY 39.77 3.11
FL 38.97 12.22
NJ 37.75 17.86
LA 37.28 8.96
IL 34.87 2.90
SC 34.67 16.43
AK 33.74 0.00
VA 32.39 7.12
NC 32.26 11.85
DE 31.25 0.00
AL 31.04 11.31
CO 28.47 6.15
OK 27.99 10.86
CT 25.51 8.96
AR 23.66 5.98
WA 23.60 4.29
TN 22.54 4.55
MI 22.37 4.10
RI 21.06 4.17
MA 20.71 4.00
OR 19.23 0.00
KS 19.05 1.16
PA 18.00 2.41
MO 17.49 1.75
OH 17.18 7.14
UT 17.16 4.60
IN 16.19 3.66
NE 15.16 0.00
WI 14.41 0.75
MN 14.15 1.56
ID 13.72 1.82
SD 13.46 0.00
WY 11.99 5.32
KY 11.65 1.72
MT 11.44 0.00
ND 9.56 0.00
IA 8.98 1.46
NH 6.43 0.00
WV 5.88 0.00
ME 4.73 0.00
VT 4.37 0.00
========================================================================
Nationwide 33.8 7.73
------------------------------------------------------------------------
Female Ownership of Radio Stations
[by State (2007)]
------------------------------------------------------------------------
Percent of Radio Stations That Are
State Owned by Women
------------------------------------------------------------------------
DE 25.00
CT 19.40
FL 11.09
ND 10.81
MD 10.68
HI 10.00
AL 9.54
IA 9.22
OK 9.14
WA 8.57
RI 8.33
KY 8.25
VA 8.19
AK 7.94
AZ 7.19
LA 6.97
WV 6.80
TX 6.76
MT 6.40
OR 6.22
PA 6.15
TN 6.06
GA 6.03
NH 5.88
MS 5.70
CO 5.59
VT 5.56
IL 5.51
IN 5.28
OH 5.19
AR 5.13
NE 4.92
NC 4.62
NY 4.15
MA 4.00
MI 3.79
NM 3.77
CA 3.76
SC 3.38
MO 2.80
WI 2.61
NJ 2.38
MN 2.33
UT 2.30
NV 1.41
SD 1.19
WY 1.06
ID 0.91
KS 0.58
DC 0.00
ME 0.00
========================================================================
Nationwide 6.0
------------------------------------------------------------------------
Female- and Minority-Owned Stations Thrive in Less-Concentrated Markets
Our analysis suggests that both female- and minority-owned stations
thrive in markets that are less concentrated. Markets with female and
minority owners have fewer stations per owner on average than markets
without them.
The level of market concentration is significantly lower in
markets with female and minority owners.
The probability that a particular station will be female- or
minority-owned is significantly lower in more concentrated
markets.
The probability that a particular market will contain a
female- or minority-owned station is significantly lower in
more concentrated markets.
Female- and minority-owned stations are more likely to be
found in each other's markets.
Allowing further industry consolidation will unquestionably
diminish the number of female- and minority-owned stations. The FCC
should seriously consider these consequences before enacting any
policies that could further concentration.
Female and Minority Ownership Is Low, Even When They're in the Majority
The study shows that women and people of color everywhere--
regardless of their proportion of the population in a given market--
have very few owners representing them on the radio dial.
The average radio market has 16 white male-owned stations
for every one female-owned and every two minority-owned
stations.
Minority-owned stations are far more likely to be found in markets
with higher minority populations. But even in these markets, the level
of minority ownership is still low.
Minority-owned stations are found in about half of all
Arbitron radio markets.
In 288 of the 298 U.S. Arbitron radio markets, the
percentage of minorities living in the market is greater than
the percentage of radio stations owned by minorities.
23 of the 298 U.S. Arbitron radio markets have ``majority-
minority'' populations. But in these markets, too, the
percentage of radio stations owned by people of color is far
below the percentage of minority population.
In two of these ``majority-minority'' markets
(Stockton, Calif. and Las Cruces, N.M.), people of color
own no stations.
Minorities own more than one-third of a market's stations in
just seven of the Nation's 298 radio markets. Minorities own
more 25 percent of a market's stations in just 24 of the
Nation's 298 radio markets.
Despite making up half the population in every market, the level of
female-station ownership is still extremely low across the board.
Female-owned stations are found in about 40 percent of all
Arbitron radio markets.
The Stamford-Norwalk, Conn. market is the only market in the
United States where women own more than half of the stations.
Women own more than one-third of a market's stations in just
six of the Nation's 298 radio markets. Women own more than 25
percent of a market's stations in just 18 of the Nation's 298
radio markets.
Format Diversity, Market Revenue and Audience Share
Minority owners are more likely to air formats that appeal to
minority audiences, even though other formats are more lucrative.
Choosing these different formats has a practical impact on the market
status of minority-owned stations, as measured by audience ratings and
share of market revenues.
Among the 20 general station format categories, minority-
owned stations were significantly more likely to air
``Spanish,'' ``religion,'' ``urban,'' and ``ethnic'' formats.
The Spanish and religion formats alone account for nearly half
of all minority-owned stations.
Primarily because the Spanish, religion and ethnic formats
attract smaller segments of the market, the average audience
ratings share and share of market revenue held by minority-
owned stations is significantly lower than the ratings and
revenue shares of nonminority-owned stations.
Female and Minority Ownership of Radio Stations
[by Format (2007)]
----------------------------------------------------------------------------------------------------------------
Percent of Format's Stations Percent of Format's Stations
Format Category Owned by People of Color Owned by Women
----------------------------------------------------------------------------------------------------------------
Adult Contemporary 1.8 5.7
Album Oriented Rock 1.8 15.1
Classical 0.0 6.7
Contemporary Hits 2.7 3.4
Country 2.3 6.8
Easy Listening 2.2 15.6
Ethnic 41.7 11.5
Jazz/New Age 11.3 8.1
Middle of the Road 1.6 6.3
Miscellaneous 6.4 3.8
News 2.2 4.8
Nostalgia/Big Band 2.5 6.1
Oldies 3.1 6.3
Religion 14.0 7.2
Rock 2.2 5.6
Spanish 39.3 4.8
Sports 3.9 3.9
Talk 4.8 4.4
Urban 32.3 6.2
----------------------------------------------------------------------------------------------------------------
Ownership and Programming Diversity: A Case Study of Talk Radio
Though the focus of this study was on structural ownership, recent
controversy surrounding remarks by two prominent talk radio hosts--Rush
Limbaugh and Don Imus--spurred an examination of talk radio programming
on minority- and female-owned stations. We found:
No minority-owned stations aired ``Imus in the Morning'' at
the time of its cancellation.
All minority-owned stations and minority-owned talk and news
format stations were significantly less likely to air ``The
Rush Limbaugh Show,'' as were female-owned stations.
Having a minority- or female-owned station in a market was
significantly correlated with a market airing both conservative
and progressive programming.
Overall, markets that aired both progressive and
conservative hosts were significantly less concentrated that
markets that aired just one type of programming.
These results suggest that diversity in ownership leads to
diversity in programming content. This result may seem obvious. But
policymakers may have forgotten the reason behind ownership rules and
limits on consolidation: Increasing diversity and localism in ownership
will produce more diverse speech, more choice for listeners, and more
owners who are responsive to their local communities.
The Commission Has Failed to Adequately Account for the True Level of
Female and Minority Ownership of Full-Power Commercial
Broadcast Outlets
Historically, women and racial and ethnic minorities have been
under-represented in broadcast ownership due to a host of factors--
including the fact that some of these licenses were originally awarded
decades ago when the Nation lived under segregation. The FCC, beginning
with its 1978 Statement of Policy on Minority Ownership of Broadcasting
Facilities, repeatedly has pledged to remedy this sorry history.\7\
---------------------------------------------------------------------------
\7\ Statement of Policy on Minority Ownership of Broadcasting
Facilities, 68 FCC 2d, 979, 980 n. 8 (1978).
---------------------------------------------------------------------------
Congress also has recognized the poor state of female and minority
ownership. The Telecommunications Act of 1996 (``The Act'') contains
specific language aimed at increasing female and minority ownership of
broadcast licenses and other important communications media.\8\ The Act
requires the FCC to eliminate ``market entry barriers for entrepreneurs
and other small businesses'' and to do so by ``favoring diversity of
media voices.'' \9\ The Act also directs the Commission when awarding
licenses to avoid ``excessive concentration of licenses'' by
``disseminating licenses among a wide variety of applicants, including
small businesses, rural telephone companies, and businesses owned by
members of minority groups and women.'' \10\
---------------------------------------------------------------------------
\8\ 47 U.S.C. 257, 309(j)
\9\ Section 257 is contained within Title II of the Communications
Act and thus does not directly encompass broadcast services. However,
the Commission has interpreted some aspects of the language of 257 to
apply to broadcast licensing. In 1998, the Commission stated: ``While
telecommunications and information services are not defined by the 1996
Act to encompass broadcasting, Section 257(b) directs the Commission to
`promote the policies and purposes of this Act favoring diversity of
media voices' in carrying out its responsibilities under Section 257
and, in its Policy Statement implementing Section 257, the Commission
discussed market entry barriers in the mass media services.'' See FCC
98-281, Report and Order: In the Matter of 1998 Biennial Regulatory
Review--Streamlining of Mass Media Applications Rules, and Processes--
Policies and Rules Regarding Minority and Female Ownership of Mass
Media Facilities, MM Docket No. 98-43, November 25, 1998, herein after
referred to as the Form 323 Report and Order.
\10\ 47 U.S.C. 309(j)
---------------------------------------------------------------------------
The Commission initially appeared to take this mandate seriously.
In 1997, the Commission completed a proceeding, as required by the Act,
which identified barriers to entry for small businesses (and has been
interpreted to include minority- and female-owned entities) and set
forth the agency's plan for eliminating these barriers.\11\
Unfortunately, subsequent triennial reports have lacked substance.\12\
---------------------------------------------------------------------------
\11\ ``In the Matter of Section 257 Proceeding to Identify and
Eliminate Market Entry Barriers for Small Businesses,'' Report, GN
Docket No. 96-113,12 FCC Rcd 16802 (1997).
\12\ In his dissenting statement on the 2004 Section 257 report,
Commissioner Michael Copps described the report as a ``a slapdash
cataloging of miscellaneous Commission actions over the past 3 years
that fails to comply with the requirements of Section 257.''
---------------------------------------------------------------------------
In 1998, the Commission further demonstrated its seriousness by
taking a crucial first step to determine the actual state of female and
minority ownership of broadcast radio and television stations. That
year, the FCC began requiring all licensees of full-power commercial
stations to report the gender and race/ethnicity of all owners with an
attributable interest in the license.\13\ In the Form 323 Report and
Order, the Commission stated:
---------------------------------------------------------------------------
\13\ 47 C.F.R. 73.3615.
Our revised Annual Ownership Report form will provide us with
annual information on the state and progress of minority and
female ownership and enable both Congress and the Commission to
assess the need for, and success of, programs to foster
opportunities for minorities and females to own broadcast
facilities.\14\
---------------------------------------------------------------------------
\14\ Report and Order, In the Matter of 1998 Biennial Regulatory
Review Streamlining of Mass Media Applications, Rules, and Processes
Policies and Rules Regarding Minority and Female Ownership of Mass
Media Facilities, MM Docket Nos. 98-43; 94-149, FCC 98-281 (1998).
Other than this monitoring effort, the FCC has done very little to
promote female and minority broadcast ownership (and the follow-up on
this monitoring has been abysmal). In its 1999 Order that allowed
television duopolies, the Commission paid lip service to concerns about
the policy change's effect on minority and female ownership, but still
went forward with rule changes that allowed increased market
concentration.\15\ In 2004, the Commission sought input into how it
could better implement Section 257 of the Act.\16\ Until this current
Further Notice, there has been virtually no action made toward
evaluating the findings of the original Section 257 studies.
---------------------------------------------------------------------------
\15\ Report and Order, In the Matter of Review of the Commission's
Regulations Governing Television Broadcasting Television Satellite
Stations Review of Policy and Rules, MM Docket Nos. 87-8. 91-221, FCC
99-209 (1999).
\16\ MB Docket No. 04-228, ``Media Bureau Seeks Comment on Ways to
Further Section 257 Mandate and to Build on Earlier Studies'' DA 04-
1690, June 15, 2004.
---------------------------------------------------------------------------
In the 2003 Order the Commission assured the public that ownership
diversity was a key policy goal underlying its approach to ownership
regulation.\17\ However, the Third Circuit found otherwise, stating
that ``repealing its only regulatory provision that promoted minority
television station ownership without considering the repeal's effect on
minority ownership is also inconsistent with the Commission's
obligation to make the broadcast spectrum available to all people
`without discrimination on the basis of race.' '' \18\
---------------------------------------------------------------------------
\17\ See 2003 Order, ``Encouraging minority and female ownership
historically has been an important Commission objective, and we
reaffirm that goal here.''
\18\ See Prometheus, note 58.
---------------------------------------------------------------------------
Before considering the potential effects of policy changes on
female and minority ownership, the Commission must first know the
current state of ownership and evaluate the effects of previous policy
changes. No one should be in a better position to answer these
questions than the FCC itself. The Commission possesses gender and
race/ethnicity information on nearly every single broadcast entity and
knows exactly when licenses changed hands.
However, the FCC has no accurate picture of the current state of
female and minority ownership, and shows no sign of taking the matter
seriously. Though the Commission has gathered gender and race/ethnicity
data for the past 7 years, it has shown little interest in the
responsible dissemination of the information contained within the Form
323 filings.
This lack of interest or concern is made evident by the FCC's own
Form 323 summary reports. Station owners began reporting gender/race/
ethnicity information in 1999, and the FCC released its first ``summary
report'' in January 2003 (for reporting in 2001).\19\ A second summary
followed in 2004 (for reporting in 2003).\20\ The most recent report
was issued in June 2006 (for the 2004-2005 period).\21\ However,
calling these publications ``summary reports'' is somewhat misleading,
as they are merely a listing of each minority- or female-owned
station's Form 323 response and not aggregated in any manner. No
information on the stations not reportedly owned by women or minorities
is given.
---------------------------------------------------------------------------
\19\ Though this data summary is not directly displayed on the
FCC's ownership data page (http://www.fcc.gov/ownership/data.html), it
can be downloaded at http://www.fcc.gov/ownership/ownminor.pdf and
http://www.fcc.gov/ownership/ownfemal.pdf.
\20\ Though this data summary is not directly displayed on the
FCC's ownership data page (http://www.fcc.gov/ownership/data.html), it
can be downloaded at http://www.fcc.gov/ownership/owner_minor_2003.pdf
and http://www.fcc.gov/ownership/owner_female_2003.pdf.
\21\ http://www.fcc.gov/ownership/owner_minor_2004-2005.pdf and
http://www.fcc.gov/ownership/owner_female_2004-2005.pdf.
---------------------------------------------------------------------------
Closer examination of these summary reports reveals significant
problems. For starters, on the FCC website where the most recent
summary files are provided for download, there is a paragraph that
explains the purpose of the data and provides a brief summary of the
tally.\22\ This website lists the total number of stations that filed
Form 323 or Form 323-E in the 2004-2005 calendar year, and then lists
the total number of stations that the FCC determined are owned by women
or people of color. All commercial stations are required to report the
race/ethnicity and gender of station owners on Form 323. Form 323-E
requires all non-commercial educational stations to report the identity
of station owners, but does not require the disclosure of the race/
ethnicity or gender information.
---------------------------------------------------------------------------
\22\ http://www.fcc.gov/ownership/data.html.
---------------------------------------------------------------------------
However, since stations that file Form 323-E don't report gender or
race/ethnicity information, it is perplexing why the FCC website
reports the total number of stations that filed either form. This
ambiguous reporting has led to some observers using these summaries to
erroneously report the wrong percentage of stations owned.\23\
---------------------------------------------------------------------------
\23\ For example, Howard University Professor Carolyn M. Byerly in
an October 2006 report writes: ``FCC data indicate that in 2005, women
owned only 3.4 percent and minorities owned only 3.6 percent of the
12,844 stations filing reports.'' This report was based on the flawed
FCC summaries of Form 323 data (see ``Questioning Media Access:
Analysis of FCC Women and Minority Ownership Data,'' Benton Foundation
and Social Science Research Council, October 2006). Also, in his book
Fighting For Air, New York University Professor Eric Klinenberg writes
that ``by 2005, the FCC reported that only 3.6 percent of all broadcast
radio and television stations were minority-owned, while a mere 3.4
percent were owned by women'' (page 28). These are the exact but
inaccurate percentages obtained from the information on the FCC 323
summary website. They were calculated by dividing the number of
reported stations by the total number of stations that filed Form 323
or Form 323-E (438/12,844 = 3.4 percent women-owned; 460/12,844 = 3.6
percent minority-owned).
---------------------------------------------------------------------------
Other problems exist in these summaries. Some station owners listed
in the 2003 summary are missing from the 2004 report but reappear in
the 2006 summary, despite the fact that ownership had not changed
during the interim period. Certain stations have ownership interests
that add up to more than 100 percent. In some instances, the type of
station facility (AM, FM or TV) is not specified.
But the most alarming problems are ones of omission. Not a single
station owned by Radio One is listed by the FCC, even though the
company is the largest minority-owned radio broadcaster in the United
States. Stations owned by Granite Broadcasting, the largest minority-
owned television broadcaster, are also missing from the summary
reports. However, examination of the individual Form 323 filings for
these stations shows that they are indeed minority-owned. Why aren't
they in the FCC's summary?
The answer likely lies in how the larger-group stations report
ownership information, and how the FCC harvests the information for
their summary reports. Most of the licenses of those stations missed by
the FCC are ``owned'' by intermediate entities, which are--in some
cases--many degrees separated from the ``actual'' owner. Some stations
file more than 20 separate Form 323 forms (one for each holding
entity), with the true owners listed on only one form. And in many
cases, the actual ownership information is attached as an exhibit and
not listed on the actual form. Thus the FCC, which tabulates the
information for its summaries by harvesting these electronic forms via
an automated process, misses stations that file in this convoluted and
confusing manner.
The Commission's lack of understanding of its own Form 323 data
became even more apparent when the Media Bureau released previously
unpublished internal studies that attempted to ascertain the true state
of female and minority broadcast ownership.\24\ A draft dated November
14, 2005, reports that there were, as of 2003, 60 television stations
and 692 radio stations owned by women; and 15 television stations and
335 radio stations owned by minorities.\25\ However, our previous
filings in this proceeding (containing the data in the Free Press study
Out of the Picture) showed that by the fall of 2006 there were 44
minority-owned stations, and this was not the result of a massive
increase in minority ownership. Indeed, the same FCC draft report
indicated just a single African-American-owned television station in
the 2003 sample period. However, a review of Granite Broadcasting's (an
African-American-owned company) Form 323 filing in 2003 showed that
they alone held nine full-power television station licenses.\26\ This
internal summary is deeply troubling in its inaccuracy and raises
questions about the data analysis ability of Commission staff, and the
commitment of the Commission to accurately monitor female and minority
ownership.
---------------------------------------------------------------------------
\24\ See http://www.fcc.gov/ownership/additional.html for documents
released in December of 2006.
\25\ http://www.fcc.gov/ownership/materials/newly-released/
minorityfemale011405.pdf.
\26\ Furthermore, FCC data also indicates that during the time-
frame of the FCC analysis, there were at least three more African-
American-owned stations (WJYS, KNIN-TV and KWCV), bringing the number
of African-American-owned stations to 12. The FCC document reported two
American Indian-owned stations; but at the time of this draft study,
FCC records indicate at least four American Indian-owned stations
(KHCV, KOTV, KWTV, and WNYB). The FCC document reported four Asian-
owned stations; but at the time of this draft study, FCC records
indicate at least seven Asian-owned stations (KBFD, WMBC, KBEO, KWKB,
KCFG, KEJB and KKJB).
---------------------------------------------------------------------------
But the biggest indication of the Commission's failure to take
seriously its obligation to track female and minority ownership is seen
in its most recent effort in this area--the 10 Official ``Research
Studies on Media Ownership''.\27\ Study #2, ``Media Ownership Study
Two: Ownership Structure and Robustness of Media'' authored by FCC
staff fails miserably in its effort to tabulate the number of female
and minority owned broadcast radio stations. It appears that Study #2
likely missed well over half of all the female- and minority-owned
broadcast station. As we demonstrate below, the FCC missed 75 percent
of the TV stations that were female-owned in 2005, and missed 69
percent of the TV stations that were minority-owned in 2005. It is
simply astonishing that the Commission could make such an error,
especially given the fact that the CU/CFA/Free Press census of TV
station racial/ethnic/gender ownership was readily available both in
the record in this proceeding, as well as reported in numerous media
outlets.
---------------------------------------------------------------------------
\27\ http://www.fcc.gov/ownership/studies.html.
---------------------------------------------------------------------------
The authors of Study #2 chose to blame perceived imperfections in
Form 323 data, and relied on flawed NTIA data as their starting point
for assessing minority ownership. This was a fundamental flaw, and
indicates a lack of seriousness on the part of the Commission in
fulfilling the mandates of Sections 257 and 309(j). The simple fact is,
the raw data contained in Form 323 individual filings is extremely
reliable and useful. The problems associated with Form 323 are not with
the data, but how the Commission automates the harvesting of the data
from these forms. There are various aspects of how Form 323 is
submitted by owners that appear to be causing the Commission trouble in
its efforts to automatically harvest the data. Some stations file
multiple forms for a single station (because of the numerous shell or
holding companies); some stations do not enter the racial/gender/ethnic
ownership information in the form, choosing to attach this information
separately (many forms that do this often have ``See Exhibit'' written
where the ownership information should be listed); some owners choose
to write ``No change; information on file'' as opposed to properly
filling out Form 323.
These are all roadblocks to the researcher who wishes to use
automated scripts to harvest Form 323 data. But they are not roadblocks
to those who actually examine each form. The simple fact is, the
Commission appears to have taken the lazy way out when faced with the
choice of inaccurate automated data harvesting or accurate but labor-
intensive manual coding of Form 323 data.
Fortunately for the Commission, we did do the hard work of
determining the ownership of nearly every single licensed full-power
commercial broadcast radio and television station. In total, the FCC
only accounted for 17 of the 68 TV stations that were actually owned by
women in 2005. This means that in its most recent, official, and
presumably best effort at assessing female ownership, the Commission
missed 75 percent of the actual female-owned TV stations. In total, the
FCC only accounted for 14 of the 45 TV stations that were actually
owned by people of color in 2005. This means that in its most recent,
official, and presumably best effort at assessing minority ownership,
the Commission missed 69 percent of the actual minority-owned TV
stations.
Though we did not verify the accuracy and completeness of Study
#2's radio ownership data, there is compelling evidence to suggest the
Commission also omitted a substantial number of female- and minority-
owned radio stations. In our study Off The Dial) we found that there
were at least 609 female-owned stations and at least 776 minority-owned
stations as of February 2007. In Study #2 the FCC reported 376 female-
owned and 378 minority-owned radio stations in 2005. There is simply no
evidence to suggest a near doubling in the level of female and minority
radio ownership in the interim, suggesting that the FCC missed
approximately 40 percent of the female-owned radio stations and missed
approximately 50 percent of the minority-owned radio stations. Given
that in the case of TV the Commission included in its tally stations
that were not female- or minority-owned, it is likely that in total,
the Commission missed over half of the actual female- and minority-
owned broadcast radio and television stations.
This inability to even come close to accurately assessing the state
of female and minority ownership simply because of a methodological
choice shows an obvious lack of concern by the Commission. This lack of
concern is truly troubling given the Commission's legal obligation to
foster improved female and minority broadcast ownership. The FCC has
both the raw data and the resources to adequately address the issues
raised by the Third Circuit regarding minority ownership but chooses
instead to ignore this issue and rely on public commenters to do its
job.
We hope that this exposure of failure will cause the Commission to
take pause and reassess its approach toward undertaking this
proceeding. The issue of ownership diversity is far too important to be
built upon a flimsy foundation of basic empirical data. Chairman Martin
recently said, ``To ensure that the American people have the benefit of
a competitive and diverse media marketplace, we need to create more
opportunities for different, new and independent voices to be heard.''
\28\ If the Chairman and the other Commissioners truly believes this to
be the case, then they should demand a complete and accurate assessment
of the ownership status of every single full-power commercial broadcast
station.
---------------------------------------------------------------------------
\28\ Remarks of FCC Chairman Kevin J. Martin, 2007 AWRT Annual
Leadership Summit Business Conference, March 9, 2007, Available at
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-271371A1.pdf. At
the same event, Commissioner Robert McDowell stated that the data on
female and minority ownership was ``extremely troubling'' to him, and
that he wanted to find out ``why that number is lower than in other
industries.'' See http://www.broadcastingcable.com/article/
CA6423119.html?title=Article&spacedesc=news.
---------------------------------------------------------------------------
Bottom Line: Consolidation Keeps Women and Minorities Off the Dial
Data in the official FCC record, particularly data gathered from
the 2000 Section 257 studies, indicates that the primary factors
influencing female and minority broadcast ownership are media market
concentration, access to capital and equity, and access to deals.
Theory supports these findings. As markets become more
concentrated, the cost of stations become artificially inflated,
driving away potential new entrants in favor of existing large chains.
Concentration has the effect of diminishing the ability of smaller and
single-station owners to compete for both advertising and programming
contracts. This, combined with the inflated asset values creates
immense pressure for the smaller owners to sell their station licenses
to larger owners.
This destructive cycle disproportionately impacts women and
minority owners, as they are far more likely to own just a single
station in comparison to their white-male and corporate counterparts.
Current owners are driven out of markets; and discrimination in access
to deals, capital and equity combined with the higher barriers to entry
created by consolidation shut out new female and minority owners from
market entry.
Thus it is clear: if the Commission intends to promote ownership
diversity, it cannot accomplish this goal while simultaneously enacting
policies that increase market concentration.
It also follows those policies that allow increased market
concentration concurrently with efforts to increase ownership by
``Socially Disadvantaged Businesses'' (SDBs) simply won't work. In
fact, it is likely that any short-term gains from such policies in
terms of the number of stations owned by women or people of color will
be offset in the long term by a loss of unique SDB owners, a loss of
SDB stations, and a loss of unique and independent media voices.
The Appendix to this testimony contains the results of econometric
modeling of the factors that influence female and minority radio
station ownership. The data strongly indicates that as market
concentration increases, the number of female and minority owned
stations decreases.
Figure 1 illustrates the impact of increasing local market
concentration on the level of female radio station ownership. Figure 1
plots the predicted probability of a market having a female owner
present against the HHI calculated from audience share (the probability
is based upon the size of the market, the percentage of minority and
female population, the presence of a minority owner in the market, and
the market audience share HHI; see Appendix for details). As the figure
shows, a small modest increase in the market concentration level could
lead to a substantial drop in the number of markets with female owners
present.
Conclusions and Recommendations
As the FCC goes back to the drawing board to reconsider media
ownership rules, it must pay close attention to the Third Circuit's
strong language regarding the Commission's failure to adequately
justify its rule changes in regards to female and minority ownership.
It is not sound policymaking to assert that diversity, localism and
female/minority ownership are important goals, but then ignore the
effects that rule changes have on these goals. Furthermore, it is a
failure of responsibility to gather valuable information on ownership
but then do nothing with the data. And it is inexcusable to continue to
release data summaries the Commission knows to be flawed.
The findings of Off The Dial and those in Out of The Picture are
crucial first steps toward understanding the true state of female and
minority broadcast ownership and the effects of FCC policy on these
owners. But more work needs to be completed, such a longitudinal
studies examining the changes produced by the 1996 Telecommunications
Act. The Commission should conduct this work and pay close attention to
the changes in ownership over time. The FCC must adequately study the
impact of rule changes on the level of female and minority ownership
prior to moving forward with any rulemaking. This issue is far too
important to make superficial attempts at addressing it, while allowing
more consolidation--the very thing that is a primary cause of the
problem.
The results of our two studies on female and minority broadcast
ownership demonstrate that any policy changes that allow for increased
concentration in television and radio markets will certainly decrease
the already low number of female- and minority-owned broadcast
stations. Enacting regulations that lead to such outcomes directly
contradicts the Commission's statutory and legal obligations under the
1996 Telecommunications Act. Instead, the Commission should consider
pro-active policies that protect and promote female and minority
ownership.
It is important to note that the effects of other policies aimed at
increasing female and minority broadcast ownership--such as tax
credits, relaxed equity/debt attribution rules, incubator programs, or
digital channel leasing--will be negligible in an environment of
increased market consolidation at the local level.
The Commission needs to think hard about the damages brought about
by the misguided policies of the late 1990s, which radically increased
market concentration. In the radio sector alone, it is hard for a new
entrant to get into the business by purchasing a single station. The
realities of the consolidated marketplace mean that owners must control
multiple stations in multiple markets to realize the economies of scale
that are needed to prosper. But these economies of scale are artificial
creations based on poor public policy decisions. The FCC has a social
responsibility to restore an environment that rewards localism and
dedication to community service.
In addition, we recommend that Congress urge the Commission take
the following actions:
The FCC Media Bureau should conduct annual comprehensive
studies of every licensed broadcast radio and television
station to determine the true and evolving level of female and
minority ownership.
The study should examine the level of ownership at
both the national level and at the local DMA and Arbitron
market levels.
The study should be longitudinal, examining the
changes since 1999, when the Commission began gathering
gender and race/ethnicity ownership information.
The study should focus on station format and content,
particularly paying attention to local news production.
The study, as well as the raw data, should be made
available to the public.
The FCC should revise and simplify the public display of
individual Form 323 station filings.
A citizen searching for the owner of a local station
should easily be able to ascertain the true identity of a
station owner, and the Commission should make it easier to
find out the true identity of past owners.
The practice of station licenses being held by layers
of wholly owned entities should be thoroughly examined by
the Commission. While this practice may serve a purpose for
the tax liability of license holders, it serves no purpose
in the identification of the those controlling the public
airwaves.
Broadcast licenses are awarded for temporary use of
the public airwaves, and the identities of the owners
should be clearly stated on a single form.
The Commission should expand the universe of stations that
are required to file Form 323.
Currently, no owners of Class-A, translator or low-
power stations are required to file ownership information
with the FCC. However, the Commission states that these
classes of stations are important entry points for female
and minority owners. To validate this hypothesis, the
Commission should extend the obligation of filing Form 323
to these stations.
Currently all noncommercial educational broadcasters
file Form 323-E, which does not solicit information about
the gender, race, and ethnicities of station owners. The
Commission should require their owners to disclose this
information.
The FCC should not take any action on media ownership rules
until it has thoroughly studied the issue of female and
minority ownership and analyzed the effects of past policies.
The FCC should also complete the open proceeding on
how to better implement Section 257 of the 1996
Telecommunications Act before proceeding with any
rulemaking.\29\
---------------------------------------------------------------------------
\29\ MB Docket No. 04-228, ``Media Bureau Seeks Comment on Ways to
Further Section 257 Mandate and to Build on Earlier Studies'' DA 04-
1690, June 15, 2004.
In addition, Congress should move to authorize the expansion of
low-power FM (LPFM) radio licenses to 3rd adjacent channels on the
dial. The interference problems cited to curtail community radio in the
past have been disproved, and the distribution of new licenses is long
overdue. This would open thousands of new local stations across the
country and promote opportunities for diverse voices to use the public
airwaves. The LPFM stations that have been licensed to date have been a
tremendous success, exemplifying the goal of a more diverse media
system. Expanding access to these localized, non-commercial licenses
would not solve the problem of minority ownership. But LPFM represents
the quickest way to bring minority owned stations online while the FCC
works to solve the long-term structural problems that have perpetuated
---------------------------------------------------------------------------
a legacy of under-representation.
Senator Cantwell. Thank you very much, Mr. Turner.
Ms. Pierson?
STATEMENT OF CAROL PIERSON, PRESIDENT AND CEO, NATIONAL
FEDERATION OF COMMUNITY BROADCASTERS
Ms. Pierson. Today I'm speaking on behalf of community
radio, and our project, Native Public Media. NFCB has been
representing and providing services to community radio stations
for over 30 years.
Nearly half of our stations are controlled by people of
color, and 40 percent serve rural areas of the country. And
many of the new Low Power FM are also our members.
I've submitted detailed testimony about the importance of
community and Native radio, the problems of media
consolidation, the need to expand Low Power FM, and new
technology-driven radio platforms. I just want to emphasize my
major points.
I'm very happy that the Committee is holding this hearing
on the future of radio. This is a critical time for radio in
the country. Radio is thriving on the noncommercial side. In
many areas, the community or public radio station is the only
locally owned, and in some cases, the only station with local
staff. In emergency situations this can be critical, and it is
why NFCB is working with NPR to be sure that all of the
community and pubic radio stations are prepared to provide
emergency information to their listeners.
We have seen during recent emergencies, the critical role
that radio plays, and I've attached a letter with my testimony
from a number of emergency management directors, on how
important they feel that a local, Low Power FM station can be.
Community radio stations are also expanding their services
through webcasting, enhanced web content and other new
technologies. It's critical that regulations and fees for use
of these new technologies recognize the budgetary and staffing
limitations of community radio, while recognizing that artists
should get paid for their work.
At the same time, there are many people in this country
that don't have an opportunity to own a radio station, or even
hear their issues covered on existing stations. We need more
community radio stations. The most immediate way to do this, is
to expand Low Power FM stations into urban areas. This requires
Congress to authorize the FCC to license LPFM stations closer
to existing stations, a technology that has been shown to work.
We know that the consolidation of radio ownership has left
local, women, and minority owners out in the cold. This is no
time to further loosen ownership rules. The FCC must re-affirm
the historic regulatory priorities of localism, competition and
diversity.
The other major area I want to tell you about is Native
Public Media. With a generous grant from the Corporation for
Public Broadcasting, NFCB was able to create a center to expand
and support media in Indian country. Currently, there are 33
public radio stations serving Native American communities. We
are hoping to nearly double that number in the filing window
that the FCC recently opened, but there is a great need to
increase this service.
If you go to a reservation that has a radio station, you
will find almost everyone listening to it. It is the ideal
medium to preserve the culture and language, discuss local
issues, and to provide health, education and emergency
services. We have discovered through consultation with Native
American leaders that complete information does not exist about
where in Indian country it's possible to put a radio station,
and where new technologies will be the way to provide a locally
owned media service.
Native Public Media is trying to launch a research project
that will pull together the research that exists, and fill in
the gaps with new research.
In summary, radio as a platform for communication and
information is, in many ways, stronger than it's ever been.
Congress should look for strategies that bring localism back to
commercial radio, encourage diversity of ownership, expand and
protect community radio, including LPFM, and ensure that new
technology-driven radio platforms are able to succeed.
I'm glad to answer any questions you have, thank you for
the opportunity to testify.
[The prepared statement of Ms. Pierson follows:]
Prepared Statement of Carol Pierson, President and CEO,
National Federation of Community Broadcasters
Chairman Inouye, Senator Stevens and Members of the Committee, my
name is Carol Pierson. I am President and CEO of the National
Federation of Community Broadcasters. I am speaking to you today on
behalf of the NFCB and Native Public Media, a project of NFCB.
Today's hearing is so important because Congress and the FCC are
facing a number of critical decisions that will greatly impact the
current radio landscape and the future of radio. In my testimony today
I want to stress several key points:
1. The overwhelming demand for terrestrial noncommercial radio
stations coupled with the explosion of Internet-based webcasts
and podcasts demonstrates that radio as a communications
platform and art form is thriving.
2. Terrestrial radio remains the closest thing this country has
to a universally accessible platform for locally originated
news, information and entertainment. Radio is more than a tool
to deliver an audience for advertisers; it's a tool for real-
time public safety communication, local culture, self-identity
and political discourse.
3. Changes in ownership rules have drastically altered the
commercial radio landscape, challenging the historic regulatory
priorities of localism, competition and diversity. To a large
extent noncommercial and community radio stations are
attempting to fill that void, but Congress and the FCC must act
to respond to the extraordinary unmet demand for additional
noncommercial platforms and resources to support existing
stations.
4. Station ownership remains a major concern, with extremely
few opportunities for women or minorities or Native Nations to
own radio stations. There is not a lack of interest--rather the
regulatory structures have placed potential commercial owners
in a market against massive conglomerates with deep pockets. On
the noncommercial side, Congress has limited the FCC's ability
to license Low Power FM stations, and opportunities like last
week's application window for Non Commercial Full Power
stations have happened rarely. Recent reports that the FCC is
considering loosening existing media ownership rules without
addressing key issues of minority ownership and localism are
very troubling.
Radio today is in the midst of a complete revitalization,
particularly through the growth of noncommercial community broadcasting
and the development of new Internet and satellite-based radio
platforms. This explosion of content demonstrates that radio as an art
form and means for communication is thriving. What is also clear is
that policymakers should re-emphasize their commitment to the
traditional regulatory priorities of localism, competition and
diversity.
Over the past 10 years, a great deal has been said about the impact
of the massive consolidation of commercial radio ownership that
resulted from the 1996 Telecommunications Act. We have heard the
complaints:
Over two-thirds of listeners and revenues in the commercial
marketplace controlled by just ten companies.
Over 70 percent of advertising revenues in virtually every
market controlled by four broadcast firms or fewer.
The scandalous lack of ownership opportunities for women and
minorities.
New, structural forms of payola that created economic
barriers for local or independent music to be considered for
rotation.
And incidents like Minot, where radio did not live up to its
potential to inform the public in an emergency situation.
Recent reports indicate that the FCC may consider lifting ownership
rules that limit the number of commercial stations a company can own in
any given market. I cannot stress strongly enough that the antidote to
runaway consolidation in the commercial radio market is not more
consolidation. Congress and the FCC must consider and implement
policies that will allow for greater diversity of ownership,
competition and localism. The Commission has built a significant record
on issues of localism and ownership. It would be a huge mistake to
allow more consolidation in the face of this record.
One of the clearest windows into the unmet demand for terrestrial
radio stations is through the experience of Native Public Media. This
is a project of NFCB that represents 33 Native owned and operated
public radio stations throughout Indian country. This project has been
made possible by a generous grant from the Corporation for Public
Broadcasting. These stations provide a unique platform for Native
programming, including news, information, education, cultural and
language preservation. Listeners enjoy these programs via the radio or
in some cases webcasts and podcasts. As Native radio blossoms, more and
more Nations express an interest in owning their own station. One-
quarter of the pleas to NPM for help in starting a radio station came
from Native communities who were experiencing an epidemic of youth
suicides. Elders, community leaders and healthcare professionals felt
that having their own tribal voice would invoke pride and
revitalization of language and enhance community life.
A big part of the mission of Native Public Media is to document the
opportunities for Native Americans to utilize broadcast and new digital
platforms to create and distribute news, information and educational
programming created by Native Nations, for the use of Native Nations.
To that end, we realize there are significant gaps in just the basic
understanding of how Native peoples access both traditional media and
new technologies. NPM has proposed a two stage research report that
will consolidate existing data commissioned by numerous government
agencies and private foundations and fill in the gaps with new original
research. Access to media is necessary in today's world, just as access
to new Internet based technologies will be increasingly critical for
economic survival. Without accurate data, policymakers are left making
difficult decisions based on assumptions and instincts. NPM hopes to
fill in the blanks with hard data.
This past week, the FCC held a rare opportunity for noncommercial
entities to apply for a full power noncommercial radio station. The
window was a significant success, as hundreds of organizations
submitted applications to the FCC including 26 from Native Nations;
interesting 6 came from a single state--Hawaii. This window
demonstrates not only the huge unmet demand for more radio stations,
but the need for the FCC to open such windows on a regular, predictable
basis.
This committee is also well aware of the need to pass legislation
to allow the FCC to grant additional Low Power FM (LPFM) licenses for
schools, churches, community groups, local governments, Native Nations
and other noncommercial entities. Since the service was established in
2000, nearly 1,000 new LPFM stations have gone on the air, providing
critically important local programming in small towns and rural parts
of the country. Because of Congressional action, however, the FCC has
been blocked from issuing these licenses in larger communities that
could greatly benefit from the service. The technology is settled, the
service is a huge success, and it is time for Congress to act once and
for all to reauthorize the Commission to expand this service.
Expansion and protection of community radio is particularly
important in light of the role existing stations play in boosting
public safety during emergencies. These stations are often the only
ones with local staff to provide emergency coverage. For example:
In 2004 KWSO staffers in Warm Springs, Oregon kept the
community abreast of the events surrounding the worst fire
outbreak of this decade.
Apache radio station KNNB also played a significant role in
keeping area residents and tourists safe during the ``MMM''
fire in 2004 providing coverage in both English and Apache.
I've attached to my testimony a letter signed by a number of
emergency management directors. I'd like to quote:
When the Hurricanes Katrina and Rita hit the Gulf Coast in
2005, the Emergency Operations Center of Hancock County turned
to a Low Power FM station to provide the essential public
safety information those rural communities needed.
Hancock County was the hardest-hit area on the Gulf Coast. In the
hours after the storm, all lines of communication connecting Hancock
County to the outside world were down--including cell phones, land
lines, Internet, police radio, and broadcast radio stations--except
one. Through the storm and in its aftermath, WQRZ-LP--a one-hundred
watt radio station, licensed to the nonprofit Hancock County Amateur
Radio Club--stayed on the air, thanks to the prodigious efforts of
station operator Brice Phillips and a few dedicated volunteers. While
commercial and other larger radio stations did their best to serve
their communities, doing great work across the Gulf area, it was the
leadership of that LPFM station, and its local volunteers, that kept
Hancock County informed.
When disaster strikes, getting up-to-date and accurate information
to citizens as quickly as possible is of utmost importance for public
health and safety. As emergency officials charged with coordinating
emergency and recovery efforts, we are convinced that the immediate,
accurate, and local information WQRZ-LP supplied during the storm saved
hundreds of lives in Hancock County.
Finally, it is important for Congress to continue to focus on the
establishment of fair and balanced structures that allow noncommercial
webcasting to continue. Internet radio provides a boundless opportunity
for diverse programming, particularly for the thousands and thousands
of organizations and individuals who would like to run terrestrial
radio stations but are unable to do so. In addition, the Internet
allows listeners to access broadcast content anywhere in the world.
NFCB and other webcasters recognize the need to create fair royalty
structures that allow artists to be compensated for their work. At the
same time, the government should establish fair and reasonable rates
and reporting structures that recognize the value of this service and
the volunteer and noncommercial nature of many of these stations.
In summary, radio as a platform for communication and information
is in many ways stronger than it has ever been. The Congress should
look for strategies that bring localism back to commercial radio,
encourage diversity of ownership, expand and protect community radio
and ensure that new technology-driven radio platforms are able to
succeed.
Thank you again for the opportunity to testify, and I look forward
to any questions you may have.
______
October 8, 2007
Public Safety Officials Endorse Low Power FM Radio Expansion--Sign on
Letter
This letter, authored by Brian Adam, the Emergency Operations
Center Director for Hancock County, Mississippi, has been put forward
as a petition letter for emergency response professionals and
broadcasting experts to endorse, as they lend their support to Low
Power FM radio. To learn more about Low Power FM, and how these
stations provide essential services in times of crisis, visit http://
www.prometheusradio.org.
To whom this may concern:
As public servants working for the safety, protection, and growth
of our communities, we believe that access to a locally-owned and
locally-controlled radio station is an essential component of public
safety. For this reason, we support the expansion of Low Power FM radio
(LPFM) stations to nonprofit groups, government organizations, and
municipalities across the United States.
Please refer to the important example below when considering your
deliberations as to whether or not you support expanding Low Power FM.
When the Hurricanes Katrina and Rita hit the Gulf Coast in 2005,
the Emergency Operations Center of Hancock County turned to a Low Power
FM station to provide the essential public safety information those
rural communities needed.
Hancock County was the hardest-hit area on the Gulf Coast. In the
hours after the storm, all lines of communication connecting Hancock
County to the outside world were down--including cell phones, land
lines, Internet, police radio, and broadcast radio stations--except
one. Through the storm and in its aftermath, WQRZ-LP--a one-hundred
watt radio station, licensed to the nonprofit Hancock County Amateur
Radio Club--stayed on the air, thanks to the prodigious efforts of
station operator Brice Phillips and a few dedicated volunteers. While
commercial and other larger radio stations did their best to serve
their communities, doing great work across the Gulf area, it was the
leadership of that LPFM station, and its local volunteers, that kept
Hancock County informed.
When disaster strikes, getting up-to-date and accurate information
to citizens as quickly as possible is of utmost importance for public
health and safety. As emergency officials charged with coordinating
emergency and recovery efforts, we are convinced that the immediate,
accurate, and local information WQRZ-LP supplied during the storm saved
hundreds of lives in Hancock County.
WQRZ was the source of information for county residents, directing
them to critical relief resources like food, water and ice, as well as
to Red Cross, medical and rescue services. Recognizing the opportunity
to coordinate with this information source, Hancock County officials
invited WQRZ to move its studio to the Emergency Operations Center, and
petitioned the FCC to increase WQRZ's signal coverage. The marriage of
WQRZ-LP radio with the Hancock County EOC and the Public Information
Office overcame many of the barriers facing emergency management's
ability to communicate en masse with the citizens of Hancock County.
Many cities would like to take advantage of these inexpensive,
reliable, diverse community radio stations--for culture, community, and
technical training, as well as public safety. The City of Richmond
works closely with WRIR-LP--a community radio station--to provide
emergency information to the city, in the event of a crisis.
Unfortunately, Low Power FM station availability was limited from
most cities when Congress opted to explore whether or not these new
radio stations would interfere with those already on the FM dial.
Congress asked the FCC to prove that there was room for LPFM, which
they did in 2003, with a $2.2 million taxpayer-funded technical study.
Now that the government has proved that there is plenty of room for
more Low Power FM radio on the FM dial, we think it is high time for
Congress to let the FCC give out licenses across the nation, and to let
our communities expand their capability to communicate critical
information to the public in times of disaster.
The expansion of Low Power FM radio is a goal that all Americans,
and their elected representatives, can support. And, as emergency
service providers from many diverse areas, we encourage the government
to stand behind one form of vital emergency communications that can
serve our communities, from coast to coast--without costing the
government a single penny more.
Signed,
Brian Adam,
District 2 Supervisor,
Hancock County, MS.
Bobby Strahan,
Director, Emergency Operations
Center,
Pearl River County, MS.
Butch Loper,
Director, Mississippi Emergency Management,
Jackson County, MS.
Ernest Jackson,
Director, Emergency Management Agency,
Elizabethton-Carter County, TN.
Senator Cantwell. Thank you, Ms. Pierson for your
comprehensive testimony on so many different topics.
Ms. Rehm?
STATEMENT OF DANA DAVIS REHM, SENIOR VICE PRESIDENT, STRATEGY
AND PARTNERSHIPS, NATIONAL PUBLIC RADIO
Ms. Rehm. Good morning, Senator Cantwell, Chairman Inouye,
and Members of the Committee, I'm Dana Davis Rehm, NPR's Senior
Vice President for Strategy and Partnerships.
I'm thrilled to share the views of NPR and our member
stations on the future of radio.
In our view, radio's future depends on content, and
connection to communities. In the arena of high-quality radio
programming, public radio has no peers. Over 30 million
Americans tune in each week to programs like Morning Edition,
and All Things Considered. These shows are drawing on reporting
from our bureaus around the world and throughout the United
States, but the foundation of this service is the network of
over 800 local radio stations in communities across America.
In recent years, NPR has expanded its news, and NPR
stations are investing in their reporting and local
programming. When their strengths are combined with NPR's
national and international reporting, the result is one of the
largest, most capable and trusted news networks in the world.
NPR is also creating new shows and services. Tell Me More
launched a few months ago. It explores how we all intersect and
collide in a culturally diverse world. News & Notes is a
relatively new show that explores topics and exposes voices
that diverse audiences are seeking, and cannot find in
mainstream media.
Other public radio organizations--American Public Media,
and Public Radio International--are also innovating. APM is
home to a powerful new concept, Public Insight Journalism,
which has created the Public Insight Network--thousands of
listeners who volunteer their experiences and knowledge to help
news staff cover stories with authenticity and depth.
While content is our first principle, the future of radio
depends on effective use of technology. Our audience is
increasingly wanting content when and where it is most useful
to them, and on a multitude of devices.
Yet, broadcasting will be the way that most listeners hear
public radio for the foreseeable future, and even there,
choices abound. Stations are converting rapidly to digital
operations, making radio more accessible and more varied.
Stations can provide not one, but two or more streams of free
programming. Soon, radio reading services for the blind will
not need special receivers. Deaf and hard-of-hearing Americans
will have access to real-time public radio content in the form
of display text on new receivers.
Stations can broadcast a new Spanish language service, or
provide music streams, and this is only the beginning for
digital radio. We also see the vast space created by the web as
a place for deeper, and more varied, content and connection.
To ensure that the experience of the web is as important in
people's lives as our broadcasting, we seek to present
perspectives, voices and stories that are not seen on every
other news site. At their best, their web content will foster
personal growth, create connections to others, and strengthen
the civil discourse.
The upcoming 2008 election is key to realizing our evolving
world. We plan to pool resources across public media, integrate
election content on public media websites and on-air. The
public will benefit from a deep collection of election-related
content, produced and curated by public broadcasters, and they
will be invited to contribute their ideas in a nationwide civic
dialogue.
Other web-based services are gaining acceptance. Among
these are podcasting--NPR and a host of public radio stations
and producers present a service that is among the most popular
nationwide. Music discovery--soon NPR and stations will launch
a web-based music discovery service, original concerts, studio
sessions and discovery features will come together on NPR.org,
where the audience can learn more about music genres and
artists rarely heard on commercial radio.
In the mobile space, we are piloting an NPR mobile
service--NPR Mobile Web, and NPR Mobile Voice offer stations
and NPR content on handheld devices, and on any phone line.
The future of radio depends on equal parts programming and
technology, so that audiences can be enriched, educated and
informed at all times and places most convenient and useful to
them.
Mr. Chairman, Senator Cantwell, while others have downsized
their programming investment, NPR and our stations are
investing more. We have launched a major national effort, known
as the Local News Initiative, to aid stations in the production
of high-quality, in-depth, local and regional news. Our goal is
to strengthen news across the Nation, to build the capacity of
stations to sustain that effort, and to create meaningful,
long-lasting relationships between NPR stations and their
communities.
The LNI was launched to provide a framework for change that
will elevate both stations and national producers to better
serve the public.
In short, the future of radio rests with programming first,
and with our wise use of technology, and ceaseless efforts to
connect with the American people, and in each case, NPR and
public radio are working hard to lead the way.
Thank you.
[The prepared statement of Ms. Rehm follows:]
Prepared Statement of Dana Davis Rehm, Senior Vice President,
Strategy and Partnerships, National Public Radio
Good morning, Chairman Inouye, Senator Stevens and Members of the
Senate Commerce Committee. I am Dana Davis Rehm, Senior Vice President
for Strategy and Partnerships for National Public Radio. I am pleased
to offer the perspectives of NPR and its 850 member stations on the
Committee's hearing topic this morning--the future of radio. Actually,
I'm more than pleased, I thrilled to be here. At NPR and within public
radio we believe we are charting the future course of radio.
The future of radio depends on programming and content first and
foremost. In the arena of high-quality radio content, NPR and public
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Other Internet program distribution platforms are gaining wide
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produced by Radio Netherlands.
On November 5, NPR will launch a new music service on npr.org in
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learn more about music genres and artists rarely heard on commercial
radio. Over time, we plan to expand this service to include more member
stations.
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unique in its content delivery platform and business model. In
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or any phone line.
The changing demands of new content delivery technologies, and of
our audiences who use them, are the catalyst for change in way we are
producing content. Whether it's the delivery of news and information,
music, entertainment or cultural enrichment shows, assembly of the
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systems is increasingly important. Our concept for the future is built
upon full utilization of digital technology.
The future of radio is dependent on equal parts of programming and
technology so that audiences are engaged with content that enriches,
educates and informs at the times and places most convenient and useful
to them.
Mr. Chairman, we are investing our resources in both programming
and technology. We are expanding in both areas and we are adding staff
. . . reporters, producers, editors . . . to bring the world, community
by community, to our audience.
In contrast to the expansion of regional, national and
international news coverage by NPR and others in public radio, the last
decade has seen a remarkable retreat in other American broadcast media
from serious, careful, and balanced presentation of news, information,
and ideas.
Public radio is responding to this growing trend with Local News
Initiative (LNI). This is a national effort to increase public radio's
listener service through investments that enhance station capacity to
provide quality, in-depth news. As other media continue to retreat from
serious local news coverage, many stations have recognized that the
need for high quality local content and news is becoming more and more
critical. Our goal is to increase the level and quality of serious
local news coverage in communities across the Nation; strengthen the
capacity for local public radio stations to sustain local news efforts;
and, create meaningful and long-lasting relationships between NPR,
stations and the stations' local communities. Working in partnership
with stations and other public radio organizations, the LNI was
launched to provide a framework for long-term transformational change
that can elevate the ability of both stations and national program
producers to better serve the public.
In short, Mr. Chairman, the future of radio rests with programming,
technology and ceaseless efforts to connect with the American people.
In each case, NPR and public radio are leading the way.
Senator Cantwell. Thank you very much, and I thank all of
the witnesses for their testimony. I'm going to turn now to the
Chairman to see if he has any questions he would like to ask.
The Chairman. Madam Chair, I'm very much impressed by the
quality of the testimony this morning. I have about 10 pages of
questions I'd like to submit to all of you for your responses,
if I may. And this testimony convinces me that this Committee
must look into matters such as consolidation, diversity, local
news--diversity, not just on news, but on ownership--and we'll
be doing that under the aegis of Chairman Cantwell.
Thank you very much.
Senator Cantwell. Thank you, Mr. Chairman, Senator Snowe,
do you have questions?
Senator Snowe. Yes, thank you very much, Madam Chair and
Mr. Chairman for holding this hearing, because I think it is
crucial, particularly at this time, since the FCC is looking to
further consolidate within the medium. That's why I'm pleased
to work with Senator Dorgan on this question, and expanding the
comment period, at the very least, and then go from there.
But it's a critical question, because we're seeing a
declining number of radio stations, that has certainly occurred
in my state. In fact, the FCC held a hearing on localism in our
state recently, one of the six hearings nationwide. And it was
a very active hearing. People are very much concerned about the
fact that we're losing local content, losing the competition,
losing the diversity that all of you have addressed here today.
So, I think that ownership consolidation is going to
really, I think, undermine all of these principles, without
question. And so, I think that we, I appreciate the fact that
we're focusing on this question.
I would like to ask you, Mr. Withers, what steps are your
members taking to ensure local content of programming? Because
I, you know, I am concerned about what is happening with radio
ownership consolidation that affects the consumers and, you
know, in my state and across this country, and how has it
affected diversity and the content that's available to people
in the various communities?
Mr. Withers. Senator, thank you for the question. As I
understood it--because I didn't want to answer a question that
I didn't understand correctly--you wanted to know what steps
our members had taken to ensure diversity in programming?
Senator Snowe. In local content.
Mr. Withers. In local content. I was--and you mentioned the
hearing that just was attended, was held in your state--I was
privileged to attend the hearing that was held in Chicago at
Jesse Jackson's headquarters, where--and the reason I even
bring it up, is that my daughter, who just finished her term as
Chairman of the Illinois Broadcasters Association and owns 10
stations in her own name and right, totally separate from
anything that I do, was one of the testifiers at that hearing.
And she basically--I'm parroting what she was saying--but good
broadcasters do good local service and they understand, whether
they're group owned or not, they understand that you can't take
from a community unless you have put into the community and are
a part of the fiber and fabric of it.
We're seeing that played out, as we speak now, in Southern
California, where a commercial broadcaster just gave his
facility to the public broadcast station that was burned out
this morning, and they will continue that until it's over with.
And you know, you've asked me what time it is and I tell
you why the Swiss are neutral. There is no real answer for
this. You have to understand what the community is and you have
to supply their needs. And a good broadcaster will do that. I'm
sure there are probably bad chiropractors, bad broadcasters,
and I hope I never get a bad brain surgeon. But we try to be
the best that we can be.
Senator Snowe. So, what kind of steps is the membership
taking in that respect?
Mr. Withers. What concept----
Senator Snowe. What kinds of steps are they taking and how
do you expand diversity and, within the industry? I mean, what
can we be doing in that regard, and what is your membership
doing?
Mr. Withers. We have a, the NAB itself, which is the only
thing, I represent them, has a Broadcaster's Foundation, which
has an outreach program, where we train minority people of
color, females, anybody that frankly wants to take the course.
We have scholarships for them so they don't have to pay for it.
We have an incidence rating of, I think, 80 to 90 percent of
the ones who finish this--this program, wind up in management
and many of them, and I've kept in contact with them over the
years, have gone on to become station owners. So we are
fostering all we can and promoting all we can on a voluntary
basis within the National Association of Broadcasters.
Senator Snowe. Thank you.
Mr. Withers. By, under the aegis of the National
Association of Broadcasters Education Foundation.
Senator Snowe. And finally, Mr. Turner, I appreciate your
passion about the issue of media consolidation. I couldn't
agree with you more. Many of us on this Committee and certainly
Senator Dorgan in that respect. What steps do you think that
this Committee should take in response to the announcement made
by the FCC, as they prepare to look at changing the media
ownership consolidation rules?
Mr. Turner. Well, that's a really good question. Just to
give a little bit of background. This is such an important
issue, that the Commission had 10 separate studies conducted on
the issue, that took the authors over 8 months to actually
perform the work. Now, there was no public input on how those
studies were conducted, but once the studies were released, we
were given 60 days to comment on thousands of pages and very
complex statistical studies.
Yet, 30 days into that comment period, we still hadn't
received the underlying data. Only 10 days before the comments
were due, did the Commission finally release all the underlying
data and allow us to conduct some meaningful analysis of this
from the public interest perspective.
Now, they gave us a 20-day extension on filing comments,
which we did this Monday, and we filled the record with over
2,500 pages of comments on these studies. Now, mostly we dealt
with the issue of newspaper or television broadcast ownership,
but if we would have had our 90 days, we would have given
another 2,500 pages on the issue of radio.
But fundamentally, I think what the current data shows, is
that the best way to promote localism and diversity in radio is
to simply roll back consolidation. That will produce more
stations that can get in the hands of local owners.
Now, what you can do as Congress to step in and make sure
this process is conducted in an open and transparent manner, is
to send a message to the Chairman and say, you know, bring them
up here, ask him some questions, ask him what is his opinion on
the impact of media consolidation and how it impacts
communities of color and women. And, send a strong message that
there's a bipartisan consensus on this Committee and throughout
this body as a whole, that media consolidation should not be
permitted.
Senator Snowe. I appreciate that and we are going to follow
up on all of those issues. And, I thank you very much.
Senator Cantwell. Thank you, Senator Snowe.
Senator Dorgan?
Senator Dorgan. Madam Chair----
Senator Cantwell. And I will remind my colleagues, we
didn't start the clock for members, but since we are expecting
a vote, if everybody could keep their questions to 5 minutes,
that would be appreciated.
Senator Dorgan. Mr. Turner, as you know, the previous rules
that the FCC promulgated, which were struck down by the court,
the Senate expressed itself very strongly opposing the rules in
a vote on this floor of the Senate, would have in the largest
cities of the country, allowed one company to own eight radio
stations, three television stations, the newspaper, and the
cable company. And that was going to be just fine. Well, it
wasn't with the U.S. Senate. And, it wasn't with the circuit
court.
But, those who counsel for unlimited, virtually unlimited
concentrations say, ``You know what, this is good. It's
localism, it's fine. Nobody's going to do anything that's
counterproductive to local interests.'' We've had hearings in
here where we've heard about voice tracking, a guy sitting in a
basement in Baltimore saying, ``It's a great day here in Salt
Lake City. The sun's up, we're going to have a wonderful day
and I'm glad you have joined me,'' pretending that he's in Salt
Lake City. In fact, he's broadcasting out of a basement in
Baltimore. That's called ``voice tracking.'' How prevalent is
voice tracking? Do you have any data about that?
Mr. Turner. There doesn't exist a lot of data on voice
tracking because this is primarily something that is in its
nature, phantom, and hard to keep track of. And this is
something that we would encourage the Commission, along with
its efforts to track issues like payola, to start looking at
the issue.
Senator Dorgan. It's kind of a virtual localism, isn't it?
I mean, it's, let's pretend that we're part of your community,
but are not. The reason I mentioned that is, in addition to
that sort of pretending that they're part of the local
community, we also see a substantial diminution of personnel in
the newsroom in many cases. And Mr. Withers, I'll ask you about
that in a moment.
But there's, I think, a fairly substantial amount of
evidence about consolidation of newsrooms. For example, in one
North Dakota community--I would say to you Mr. Withers--one
radio company from out of state bought all six commercial radio
stations. And so, you know, they run homogenized music through
their board, I guess, and they basically emasculated most of
the news gathering in those areas. I suppose they would
consider themselves local, but they're really not. Tell me,
what kind of information with respect to cross-ownership,
allowing as the Commission seems to want to do, the common
ownership of newspapers and radio and television stations in
the same market?
Mr. Turner, you have analyzed the data by the FCC. The FCC
maintains that there's no problem here at all. Tell me your
analysis of that data?
Mr. Turner. Well, that's right, Senator. During this
process, the former chief economist at the FCC, a woman by the
name of Marx, she wrote a memo, basically starting with the
question, ``How can we loosen these rules?'' She didn't start
with the question, ``What's in the public interest?'' And the
resulting way the research was framed and was conducted in
these 10 studies, was trying to look at whether or not a
station does more local news if it's in a cross-owned
relationship.
We said, the actual question that should have been asked
is, ``What happens at the market level?'' Because simple
economic theory predicts that as you have a more powerful owner
in a market, it may push out the other owners who are doing
diverse news. And lo and behold, when we actually looked at the
FCC's own data in three separate studies and aggregated at the
market level, it's exactly the result we found. The strong
statistically significant effect that cross-ownership of
newspapers and television stations in a local market leads to
far less local news.
Senator Dorgan. That's an important contribution.
Mr. Withers, let me--let me say this. There are some
wonderful broadcast owners across this country who do
remarkable local service, and I admire the work they do every
day. But, there is a localism proceeding that has never been
completed. Localism is a very important part of providing the
license to use the airways free of charge. And with those
licenses, we've now gone from 3 years to 8 years and basically
send a postcard and make a few assertions and you continue to
have the license.
I do think that concentration is at odds with localism, and
I think that's demonstrated in many markets across the country.
You obviously disagree with that, I expect. Tell me how
concentrations of 400 or 200 or 1,200 radio stations serve
localism, the interest of localism, in your judgment?
Mr. Withers. Senator, it depends on, in many cases, and I
think I'm familiar with the foreign--I hate to call them
foreign--the out-of-state owner that owns the six radio
stations in the community in which you refer. I compete against
the same out-of-state company in an area where they have one
newsman, I have 16. So, granted, I've spread it over, it's
spread over several stations and we do election returns, we do,
literally, region-wide election returns, and then there might
be as many as 50 people that we have stringers out doing that.
Their competition in one of these markets only has a half a
newsperson. I don't agree with that. That's not the way that I
said when I addressed Senator Snowe a moment ago. We, you have
to put into a community before you can take anything out of it,
whether it's advertising revenue or anything we do.
And so, I agree with you. If it's abused, it's like any
other thing. If it's been abused, it's not good. If it's done
well, then it's, I can afford to put the different news people
into a town that wouldn't have one, ordinarily. I mean, we're
talking about towns of 8,000, 9,000 people.
But we'd, and we do it and believe in it and it has helped
grow, grow, grow. And so, it's yes and no, it's hot and cold,
it depends on how well they operate and who they are. And I'm
not saying that I'm the fantasy, I'm the know all, see all
about any of this. It's just after 50 years, I can, I have seen
what works and I've also seen what doesn't work. And it works
if you're there serving the local communities.
Senator Dorgan. And, I will finish my time here. Serving
local interests works, it's no question about that, and I don't
think there's any question either about what concentration does
to diminish the service to local interests. It's happened all
around the country. And, I think that failure to serve local
interest by this dramatically increased concentration is what
persuades many of us to suggest that what the FCC wants to do
is exactly the wrong thing.
Mr. Withers. I respectfully feel that the concentration in
and of itself does not cause diminution of service. It's the
approach in which it's taken by the different people. There are
some markets, I mean, I've got a market now where I have to
replace, and I hope he's not watching this or listening to it,
where I have to replace the manager. He's got four stations
under him.
Senator Dorgan. Well, tell us the market.
[Laughter.]
Senator Dorgan. We won't leak a word of it.
Mr. Withers. Oh, you won't say a word. Yes.
But it's because I don't feel he serves the community
correctly. But, and that's, the buck stops here. I'm the one
that hired him, so I'll be the one that will, that will allow
him to take instant retirement, which is a nice fringe benefit
that we occasionally offer to some of the people that don't
function. But I know what needs to be done. He doesn't agree
with me.
And so therefore, I'll replace him. But the fact that it's
a market that's about 250 miles from where I live has nothing
to do, the consolidation didn't do it. If I lived in the town
and he were the manager, it wouldn't improve it any. It might
somewhat. I'd probably get invited to more parties, but that
would be about it. I don't think that the consolidation of
itself is bad, it's the way in which the consolidators have
approached it.
And, in the case of the 500-pound gorilla in the room is
Clear Channel, and they have seen, I think, so they were trying
to run two different companies, a large-market company and a
small-market company. And as you are well aware, they are
selling off 440 some-odd radio stations. And they're going into
diverse hands and much smaller group operators, and I think
you'll see that the marketplace is taking care of, in this
case, a lot of the lack of attention or difference in
management philosophies that might occur in a large or a small
market.
Senator Dorgan. But I think the very thing you've
described, represents the failure, however, and represents the
reason that we have to take action to prevent the FCC from
further damaging the radio and television and the industries
that we rely on.
I've taken more time. There's much more to say at some
point later. I thank the entire panel. It's some really
terrific testimony. Mr. Withers, thank you, and the NAB as
well.
Senator Cantwell. Thank you.
Senator Sununu?
STATEMENT OF HON. JOHN E. SUNUNU,
U.S. SENATOR FROM NEW HAMPSHIRE
Senator Sununu. Thank you very much. Sorry for arriving a
little bit late. I read much of your testimony. I did not hear
it all, so I apologize if I mention anything or ask anything
that's a little bit redundant.
Mr. Withers, I wanted to start with you. And, you know we
hear a lot of talk about consolidation and big media and, you
know, big isn't necessarily a bad thing. We can think of a lot
of industries where we've seen large companies competing and
driving down prices for consumers, maybe in manufactured goods
and other areas. And I suppose large can be good when it comes
to distributing information or content, broadcasting. It's not
necessarily a bad thing. But oftentimes the rhetoric is,
``Well, concentration is bad. We need to move away from that.''
The reason I make this point, is because despite all of the
rhetoric, you've got information in your testimony that there
are more radio station owners today than there were in 1972.
And if you listen to all the rhetoric out there, you would
think just the opposite. There must be one-tenth the number.
There must be half the number. There must be one-third the
number that there were 25 or 30 or 35 years ago. So, I want you
to talk a little bit about that statistic, to what extent have
the number of owners increased since 1972 and why?
Mr. Withers. Thank you for the question. The number of
owners has increased because there are more stations that have
come on the air. They've had several proceedings where they've
opened up--8090 was the great one, where they, I think they
decreed that anybody born within a certain period of time was
not given a Social Security card, but was given a license for
an FM station.
[Laughter.]
Mr. Withers. But in an attempt to--no, that wasn't how I
got in the business. I don't think we had Social Security when
I got in the business, but the, no it wasn't.
But there have been more--and part of it is attributable to
the fact that as we've had more educational systems and
programs, like the one that the NAB has, and there are more and
more and better broadcast schools. Southern Illinois University
in Carbondale, for example, has a tremendous broadcast school.
And as you produce more good product, the eagles will want to
fly and they want to fly to their own nest. And so, they'll get
stations.
There are plenty of stations there. We have, because of the
technological changes that the Commission has, FCC has done,
there are more stations that fit in, in more places. And the
computer modeling has allowed that to happen. And more and more
people have applied for and gotten and are running stations.
So you know, when you look at, the first, the top two or
three companies probably control 8 to 10 percent of the radio
stations. The next 50 owners, own less than 50 stations. And
once you get past that, it's all very small groups. There might
be a man and his wife that will have four. My daughter, for
example, has 10 scattered in two states, Missouri and Illinois.
And so there are a lot of small owners that own a, they're not
single station owners, but they don't own a lot of stations.
And so, when you--it looks--it's always easy, that's why
they don't call it Lieutenant Motors, it's General Motors.
There's always a big one that everybody throws darts at. But
then, once you get past the top two or three and you get down
past that next 50, who don't own a lot of stations,
collectively, when you consider the universe of stations, the
rest of those are all small operators. And that's what, where
the number comes from.
Mr. Turner. Senator Sununu, can I possibly respond to that?
Senator Sununu. Sure.
Mr. Turner. When we talk about concentration, we're not
just talking about the number of stations. We're also talking
about the actual market shares of these owners in the local
markets. Now, I think it's unacceptable that in the average
market, about 75 percent of the revenue is controlled by the
top two owners. Now, this has created artificial economies of
scale in the industry that have not only hurt the local owners
of the radio stations, but it's also hurt local businesses who
look to advertise on some of these local stations.
So, when we talk about the issue of concentration, we
shouldn't just focus on the concentration of stations, but the
actual market power that these owners have been able to exert.
Senator Sununu. Well, I don't know that that's entirely
correct. Because all things being equal, if you have five
participants in the marketplace, each with the same opportunity
to reach listeners on the basis of the power of their station,
or the coverage of their station. And it turns out that
everyone in the market is listening to one station because the
other four are horrible, they may have 100 percent so-called
market share or market power by your definition, but I would
argue that there's every opportunity in the world in that
market for competition.
Now that may be a slightly simplified example, but I think
if you look at demographics and the fragmentation, the
ownership structure, in many cases, the revenue figures that
you cite have more to do with listenership than they do with
fragmentation. So, I think we need to be careful and clear and
honest when we're talking about whether there is or is, aren't
competitive forces.
Now, if you're talking about a market with, where there
might be only, you know, one radio station, which is very rare,
I'm sure there might be places where that's the case, then
obviously concentration is a greater concern.
Let me move on, because we don't have too much time and you
both obviously had ample time to address that point.
Mr. Withers, I want to talk about a slightly more
controversial issue, which is the licensing and performance
rights and copyright and royalties for composers and the like.
You talked a little bit about that in your testimony.
First, talking about the broadcasters having to pay sound
recording performance fees when they put signals on the
Internet. And, that you thought that those fees were too high.
And, I think it's important when we're dealing with copyright
content ownership and licensing that, you know, we have fee
structures that make sense, as level a playing field as
possible, and we have a good system for protecting those
rights.
But in this case, you're talking about performance fees for
streaming signals on the Internet not being fair. But don't
others, who are streaming content digitally on the Internet or
satellite radio, XM and Sirius, they're paying these same
performance fees, are they not?
Mr. Withers. Yes sir, they are. Mel Karmazan, who you
gentlemen know----
Senator Sununu. He's been here before.
Mr. Withers. He's been here before, got to sit at my
immediate right. He--he's now stated that they're usurious and
he doesn't feel he should have to pay them. What a surprise.
But----
Senator Sununu. So you take consolation in the fact that
everyone's complaining about them now.
Mr. Withers. I don't take consolation, I'm just pleased
that we have, for one thing, we have a topic that people are
united on and behind us and everybody else, I think, at the
panel. You heard testimony today that it would put, it's going
to put Pandora out of business because of the size and impact.
My opinion, personal opinion, the Copyright Royalty Board
got about 15 times more than they thought they would get. And
it's unconscionable, frankly, that when the NAB sends what I
thought was a reasonable, and a reasoned offer to them, it took
13 weeks to turn it down.
Senator Sununu. So, do you object to paying performance
fees for those who own the copyright or do you just think that
the fees as currently structured by the CRB is too high?
Mr. Withers. Talking, you're talking about Internet
streaming?
Senator Sununu. Well, why would we--why would we make a
distinction?
Mr. Withers. Because over the air, it always been----
Senator Sununu. Well, we'll get to that, then.
Mr. Withers. Well if----
Senator Sununu. We'll see if you want to narrow your answer
to Internet.
Mr. Withers. I want to narrow my answer. Yes, I'm talking
about--we frankly weren't at the--why we were asleep at the
switch and weren't at the table about 15 years ago when they
did the digital thing, I have no idea.
Senator Sununu. I'm sorry. I didn't ask a yes or no
question though. I asked whether you felt, whether you objected
to paying performance fees, or whether you simply felt that the
CRB has set them too high for Internet streaming.
Mr. Withers. We object to paying them.
Senator Sununu. So you don't think the performance,
performance copyright should be getting anything from anyone,
anytime?
Mr. Withers. Given the choice you gave me with the
question, that was where we objected to paying it. But since I,
we are where we are on this slippery slope, because it is a new
and different business model from our business model and plan,
the Internet streaming part. We had made an offer. So, since we
made an offer, we obviously wouldn't have made it unless we
were sincere about it.
Senator Sununu. I'm a--you refer to the performance fee for
Internet streaming, and I think your position is reasonably
clear there. But then, on the next page in your testimony, you
talk about a performance tax for over-the-air broadcasts. Now,
we're really talking about the same thing, are we not?
Mr. Withers. We don't feel so. We think it's a totally
different business model. For 40 years--for 40 years Congress--
--
Senator Sununu. But in both cases you're talking about
paying money to the performer, who has a copyright on a piece
of music. Correct?
Mr. Withers. We're talking about--well, if, it's a
typical--if it's a typical record company deal, the money
doesn't go to the performer to begin with. So, that's a
misnomer.
Senator Sununu. In both cases, the money doesn't--you're
claiming that in both cases, the money doesn't go to the
performer?
Mr. Withers. In both cases of, if we paid a performance
right?
Senator Sununu. Yes.
Mr. Withers. The, for the last 40 years, Congress has
agreed with our position that we are free play on our part.
They get free promotion. We're giving them free play.
Senator Sununu. I'm just trying to ascertain whether we're
talking about the same thing. You used a phrase performance
tax, but we're not talking about the government collecting the
money?
Mr. Withers. I disagree with the term, the performance tax.
It's a performance fee, but that's my personal----
Senator Sununu. Excellent.
Mr. Withers.--that's my personal.
Senator Cantwell. Senator Sununu, if you could wrap up,
because I do want to get to Senator McCaskill.
Senator Sununu. I appreciate that.
I just, this is important, I think. I want to be clear, I
mean, it's in your, the phrase performance tax was in your
testimony. So, we're talking about a performance fee or
license----
Mr. Withers. Yes, sir.
Senator Sununu.--in both cases.
OK, I appreciate that very much. Could I ask one last
question of Mr. Westergren?
You've got Pandora, and I understand vaguely, sort of, what
kind of a system you have set up and why, with such a narrow
casting or, you know, focused play list, the performance fees
could be extremely onerous for you. So, you don't have to go
into that. I think I understand.
I want to ask you a broader question to you because you're
obviously doing something that many would be considered
evolutionary, at least, in taking advantage of some of these
new platforms. Whose business model is most threatened by what
you do? And, what part of the industry or what kinds of
business do you think will be most affected over the medium and
long-term by the kinds of products and services that you're
providing? And I'll close there.
Thank you, Madam Chair.
Mr. Westergren. I guess the best way for me to answer that
is to look at who we consider our competition. And, when I'm
asked who we compete against, it's anybody who's trying to
attract someone else's listening hour. So, we are competing
with radio in its many, many forms, whether it's cable, other
Internet radio providers, broadcast radio. And increasingly,
those various forms of radio are converging. You weren't here
earlier, but I actually played a sample of Pandora's stream
through a cell phone, which with a little adapter you can stick
into your car and listen to it while you're traveling on the
highway. And so, we're in a marketplace where you sit adjacent
to all these other forms of radio. And our intention is to
compete with them.
We think, you know, if I was in their shoes, I would be
worried about Internet radio, because I think it's--I'm hearing
its footsteps behind me. And I think one of the, sort of, most
important messages I'd like to deliver today, is the idea of
parity. That we have a situation where we compete directly, but
are under radically different licensing structures, by orders
of magnitude.
Senator Sununu. Are you making any money?
Senator Cantwell. I'm going to have to----
Mr. Westergren. We're losing hand over fist right now.
Senator Cantwell. I'm going to have to go to Senator
McCaskill. She's been patiently waiting. And I want to make
sure we get her in before the vote.
We aren't going to come back after the vote, so let me
thank the panel in advance for being here, and your good
testimony. Members will be able to submit additional questions
for the record. And, if you could answer those in a timely
fashion, we'd greatly appreciate it.
Senator McCaskill?
Senator McCaskill. Thank you, Madam Chair.
I've got several different--it's hard for me in 5 minutes
to go to the different areas I'd like to go to.
Let me start with Mr. Turner. Mr. Turner, are you ever
aware, do you have any record or could you give the Committee
any information about the licensing renewal process, in terms
of accomplishing the goals that you have eloquently spoken
about this morning? Are you aware if a broadcaster has ever
been sanctioned or license revoked for not serving the public
interest?
Mr. Turner. Senator, throughout history, there has only
been a few instances of that actually occurring, where actual
licenses was revoked. One of the most famous cases involved a
station in Mississippi that actually gave airtime to the Klan,
but didn't give opposing time to Medgar Evans.
You don't really see anything like that happening today.
The license renewal process is largely a rubber stamp. Even in
the event where they have broken specific regulations, such as
the amount of advertising aired during children's broadcasting,
there's often a three or four thousand dollar fine and a thank
you very much, your license is renewed. So, from our point of
view, the license renewal process has largely lost the
oversight of the public's input into this.
Senator McCaskill. If you could provide the Committee, if
your organization has such a compilation, I think it would be
really helpful for the members of the Committee to get a,
really a grasp on how silly the notion is that license renewal
provides some kind of stick, in terms of enforcing the public
interest, in terms of broadcasting that's ongoing.
Mr. Turner. We certainly will. This is a very rich area
that we think Senators should know about.
Senator McCaskill. Thank you very much.
To Mr. Withers--first of all, every time you start talking,
I feel like I can shut my eyes and I'm listening to the radio.
What a radio voice you have. Obviously that's where you started
in the business, was behind a microphone, and you still have
the melodic voice that competes very well, I think, over the
airways with other voices.
I know your stations in Cape Girardeau. I'm very familiar
with them. I know that most of the megawatts you've got down,
most of the wattage you have down there are classic rock,
you've got contemporary hit radio, and then you've got the very
important St. Louis Cardinals, and country.
If you look at your major wattage stations in Cape
Girardeau, I'm familiar with what kind of news coverage there
is in Cape Girardeau, since I'm, you know, sometimes my mouth
is on the other side of the microphone when I travel Cape
Girardeau. I don't quarrel that you may cover the news on
those, but I don't know that those large stations are news
heavy, in terms of local news.
And the other thing I would say about those stations is
that they would be probably the ones that you would be most
likely to want to stream, in terms of your listening audience.
And, to follow up on what Senator Sununu said, I mean, I
understand your angst about this, but what Mr. Westergren said
is true. I find my listening habits have changed remarkably
since I have gotten decent headphones for my computer. And
because the sound I can now get out of my computer is
remarkable and it is so convenient and it is so easy. And I got
this for my kids, by the way, who are 20 and 18. They're the
ones who said, ``Mom, you know, get a life. Quit turning on the
radio at home, just plug into your computer.''
How in the world can the computer Internet radio industry
compete with you, if you get what they have to pay for, for
free? How does that work in a market? How can Mr. Westergren
have to pay for these--for these artists--and I know you said,
``Well, the performers don't get it,'' but surely you don't
want us to interfere in the contracting between record labels
and artists. I don't think you want Congress to begin
controlling that private contract between record labels and the
artists they represent?
Mr. Withers. No ma'am, I do not.
Senator Cantwell. Mr. Withers, before you answer, I just
want to say that we have a couple minutes left now on the vote.
I'm going to excuse myself. You can stay at your own peril here
to get the information.
[Laughter.]
Senator Cantwell. But again, thank those who were here
today to testify.
Senator McCaskill. And I have to, I can't stay for the
answer either. I've got to go because this is a very important
vote. So, if you want to hold that thought, and even though I
have two other hearings I'm supposed to be at, I will come back
for it.
Senator Cantwell. I think that what we should do is put,
submit this for testimony back. If you could provide us a
written response. This is a very important hearing, very
important issues. As you see, my colleagues care greatly about
diversification efforts and consolidation concerns, as well as
Low Power FM.
So, we appreciate you being here and we appreciate you
getting us written responses to our questions.
Thank you, the meeting is adjourned.
[Whereupon, at 11:18 a.m., the hearing was adjourned.]
A P P E N D I X
Prepared Statement of Hon. Gordon H. Smith, U.S. Senator from Oregon
Thank you, Mr. Chairman, for holding this important hearing to
examine the future of radio.
Traditional over-the-air radio is enjoying a renaissance today, the
likes of which it has not seen since the golden age of radio. The
advent of high definition radio which enables AM stations to sound like
FM stations, FM stations to deliver CD quality music, and both to
multicast additional programming streams and provide real-time on
demand traffic and weather services, will completely change the way
communities interact with their local broadcasters.
As technology has evolved and the FCC enacted policies enabling the
licensing of more radio stations, the number of outlets and owners in
the marketplace has flourished.
Indeed, the tapestry of voices that consumers can access in the
radio marketplace has never been more rich. Today, an abundance of
choices quells our appetite for audio programming. We can listen to
traditional over-the-air radio, subscribe to satellite subscription
services, plug into a personal library of music via a digital music
recorder, download and time shift local news and public affairs
podcasts from the Internet, and stream Internet radio programs to our
computers.
Similarly, competition for listeners in a market traditionally
dominated by free, over-theair radio, has never been more vigorous. The
proliferation of myriad new platforms to deliver audio programming has
completely revamped the competitive landscape in radio.
Paradoxically, this sea change of innovation in the radio
marketplace has seen a dramatic increase in the number and type of
media outlets, while ownership of those outlets by minorities and women
has plummeted. Minority and women owners of media outlets provide a
rich diversity of information to consumers of all races and both
genders. Under-representation of minorities and women as owners of
instruments of the federally regulated media industry is unacceptable
in a democratic society. I believe that there is a compelling
governmental interest in seeing that policies are enacted to address
this incongruity.
Our challenge of course is to define policies that encourage broad
ownership opportunities for all in our society, promote the continued
innovation in the marketplace, and secure the future competitiveness
and continued vibrancy of traditional over-the-air radio.
As we work to promote greater diversity of media ownership in radio
we must acknowledge the new competitive pressures that threaten the
continued viability traditional radio and its future ability to
adequately serve the public interest. We must recognize that as markets
evolve, there are situations where enabling greater media ownership
opportunities can serve the public interest by improving economies of
scale and bolstering the quality of service that consumers receive.
Let me close by stating that I am particularly committed to this
endeavor and look forward to working with my colleagues on both sides
of the aisle to enact sound polices that will increase diversity in
media ownership.
______
Future of Music Coalition
Washington, DC, November 15, 2007
Senate Committee on Commerce, Science, and Transportation,
Washington, DC.
Members of the Committee:
Future of Music Coalition (FMC) is a national nonprofit education,
research and advocacy organization that identifies, examines,
interprets and translates the challenging issues at the intersection of
music, law, technology and policy. FMC achieves this through continuous
interaction with its primary constituency--musicians--and in
collaboration with other creator/citizen groups.
FMC respectfully submits the Executive Summary from our December
2006 report, False Premises, False Promises: A Quantitative History of
Ownership Consolidation in the Radio Industry for member review
following two recent hearings: the ``Future of Radio'' hearing on
October 24, and the hearing on ``Localism, Diversity, and Media
Ownership'' on November 7. FMC believes that these documents could be
helpful for the Committee as it moves forward with its work on both
media ownership and radio.
FMC has been conducting quantitative research on the effect of the
1996 Telecommunications Act on radio, musicians and the public for the
past 5 years. In 2002 we published Radio Deregulation: Has It Served
Citizens and Musicians?, a report that was widely read, filed at the
FCC in the 2003 media ownership docket, and cited by the Third Circuit
Court of Appeals in Prometheus v. FCC. In a 2003 New York Times
interview, Commissioner Adelstein cited the evidence in FMC's study as
a key reason that further radio deregulation was removed from the media
ownership rulemaking.
The full report is available at: http://www.futureofmusic.org/
research/radio
study.cfm.
In 2006, FMC conducted additional research. False Premises, False
Promises, released in December 2006, covers thirty years of historical
data wherever possible; in other places, the study focuses on the last
ten to twelve years--the main period of interest for examining the
impact of the Telecom Act. The report relies on industry-collected data
to measure changes in radio consolidation and programming including
Media Access Pro (Radio Version) from industry consultants BIA
Financial Networks, Duncan's American Radio, and Radio and Records
magazine.
The full report is available at: http://www.futureofmusic.org/
research/radio
study06.cfm.
Key findings that are documented in the 2006 report include:
Emergence of Nationwide Radio Companies
Fewer radio companies: The number of companies that own radio
stations peaked in 1995 and has declined dramatically over the past
decade. This has occurred largely because of industry consolidation but
partly because many of the hundreds of new licenses issued since 1995
have gone to a handful of companies and organizations.
Larger radio companies: Radio-station holdings of the ten largest
companies in the industry increased by almost fifteen times from 1985
to 2005. Over that same period, holdings of the fifty largest companies
increased almost sevenfold.
Increasing revenue concentration: National concentration of
advertising revenue increased from 12 percent market share for the top
four companies in 1993 to 50 percent market share for the top four
companies in 2004.
Increasing ratings concentration: National concentration of
listenership continued in 2005--the top four firms have 48 percent of
the listeners, and the top ten firms have almost two-thirds of
listeners.
Declining listenership: Across 155 markets, radio listenership has
declined over the past fourteen years for which data are available, a
22 percent drop since its peak in 1989.
Consolidation in Local Radio Markets
The Largest Local Owners Got Larger: The number of stations owned
by the largest radio entity in the market has increased in every local
market since 1992 and has increased considerably since 1996.
More Markets with Owners Over the Local Cap: The FCC's signal-
contour market definition allowed companies to exceed local ownership
caps in 104 markets.
Increasing Local Concentration: Concentration of ownership in the
vast majority of local markets has increased dramatically.
How Lower Caps Can Be Justified: The FCC's local caps--in fact,
even lower caps than the current caps--can be justified by analyzing
how the caps prevent excessive concentration of market share.
Declining Local Ownership: The Local Ownership Index, created by
Future of Music Coalition, shows that the ``localness'' of radio
ownership has declined from an average of 97.1 to an average of 69.9, a
28 percent drop. See report for methodology and details.
Restoration of Local Ownership is Possible: To restore the Local
Ownership Index to even 90 percent of its pre-1996 level, the FCC would
have to license dozens of new full power and low-power radio licenses
to new local entrants and re-allocate spectrum to new local entrants
during the digital audio broadcast transition.
Radio Programming in the Wake of Consolidation
Homogenized Programming: Just fifteen formats make up 76 percent of
commercial programming.
Large Station Groups Program Narrowly: Owners who exceed or exactly
meet the local ownership cap tend to program heavily in just eight
formats.
Only Small Station Groups Offer Niche Formats: Niche musical
formats like Classical, Jazz, Americana, Bluegrass, New Rock, and Folk,
where they exist, are provided almost exclusively by smaller station
groups.
Small Station Groups Sustain Public-Interest Programming:
Children's programming, religious programming, foreign-language and
ethnic-community programming, are also predominantly provided by
smaller station groups.
FMC would like to reiterate to this committee that radio
consolidation has no demonstrated benefits for the public. Nor does it
have any demonstrated benefits for the working people of the music and
media industries, including DJs, programmers--and musicians. The
Telecom Act unleashed an unprecedented wave of radio mergers that left
a highly consolidated national radio market and extremely consolidated
local radio markets. Radio programming from the largest station groups
remains focused on just a few formats--many of which overlap with each
other, enhancing the homogenization of the airwaves.
From the recent new-payola scandal to the even more recent
acknowledgements that giant media conglomerates have begun to fail as
business models, we can see that government and business are catching
up to the reality that radio consolidation did not work. Instead, the
Telecom Act worked to reduce competition, diversity, and localism,
doing precisely the opposite of Congress's stated goals for the FCC's
media policy. Future debates about how to regulate information
industries should look to radio for a warning about the dangers of
consolidated control of a media platform.
Future of Music Coalition urges this committee to resist any
attempts by the FCC to further loosen or eliminate media ownership
regulations.
Respectfully submitted,
Jenny Toomey,
Executive Director.
Michael Bracy,
Policy Director.
Kristin Thomson,
Deputy Director.
______
False Premises, False Promises:
A Quantitative History of Ownership Consolidation
Executive Summary
This report is a quantitative history of ownership consolidation in
the radio industry over the past decade, studying the impact of the
Telecommunications Act of 1996 and accompanying FCC regulations.
A Brief History of Radio Regulation
Since the 1930s, the federal government has limited the number of
radio stations that one entity could own or control. In the 1980s and
early 1990s, the Federal Communications Commission (FCC) began
gradually to relax these limits. Finally, in the Telecommunications Act
of 1996 (Telecom Act), Congress eliminated the national cap on station
ownership, allowing unlimited national consolidation. With the same
law, Congress also raised the local caps on station ownership. In
addition, as this study describes in detail, the FCC regulations
implementing the Telecom Act allowed more consolidation to occur than
alternative regulations would have allowed.
Methodology and Data Sources
To keep the quantitative analysis as simple and transparent as
possible, we have not included technical statistical analysis. Instead,
we have filled this report with standard, antitrust-style measures of
concentration; our own new methodologies for measuring localism and
diversity; and many time-series analyses that simply track who owned
what when. The study covers thirty years of historical data wherever
possible; in other places, the study focuses onthe last ten to twelve
years--the main period of interest for examining the impact of the
Telecom Act.
The FCC's own efforts at collecting data on the radio industry are
inadequate, as we emphasize throughout the study. Just as the FCC does,
we have relied on industry-collected data to measure changes in radio
consolidation and programming. These proprietary sources include: Media
Access Pro (Radio Version) from industry consultants BIA Financial
Networks, Duncan's American Radio, and Radio and Records magazine.
Major Findings of the Study
Highlights from the study are organized here in similar fashion to
its three chapters. The first chapter focuses on national radio
consolidation, the second on local radio consolidation, and the third
on radio programming.
Emergence of Nationwide Radio Companies
1. Fewer radio companies: The number of companies that own radio
stations peaked in 1995 and has declined dramatically over the past
decade. This has occurred largely because of industry consolidation but
partly because many of the hundreds of new licenses issued since 1995
have gone to a handful of companies and organizations.
2. Larger radio companies: Radio-station holdings of the ten
largest companies in the industry increased by almost fifteen times
from 1985 to 2005. Over that same period, holdings of the fifty largest
companies increased almost sevenfold.
3. Increasing revenue concentration: National concentration of
advertising revenue increased from 12 percent market share for the top
four companies in 1993 to 50 percent market share for the top four
companies in 2004.
Figure 1: National Share of Radio Listeners, Commercial Sector, 2005.
4. Increasing ratings concentration: National concentration of
listenership continued in 2005--the top four firms have 48 percent of
the listeners, and the top ten firms have almost two-thirds of
listeners [see Figure 1].
5. Declining listenership: Across 155 markets, radio listenership
has declined over the past fourteen years for which data are available,
a 22 percent drop since its peak in 1989.
Consolidation in Local Radio Markets
6. The Largest Local Owners Got Larger: The number of stations
owned by the largest radio entity in the market has increased in every
local market since 1992 and has increased considerably since 1996 [see
Figure 2].
Figure 2: Number of Stations Owned in a Market by the Largest Owner in
a Market, 1975-2005, Average by Market Group.
7. More Markets with Owners Over the Local Cap: The FCC's signal-
contour market definition allowed companies to exceed local ownership
caps in 104 markets.
8. Increasing Local Concentration: Concentration of ownership in
the vast majority of local markets has increased dramatically.
9. How Lower Caps Can Be Justified: The FCC's local caps--in fact,
even lower caps than the current caps--can be justified by analyzing
how the caps prevent excessive concentration of market share.
10. Declining Local Ownership: The Local Ownership Index, created
by Future of Music Coalition, shows that the localness of radio
ownership has declined from an average of 97.1 to an average of 69.9, a
28 percent drop.
11. Restoration of Local Ownership is Possible: To restore the
Local Ownership Index to even 90 percent of its pre-1996 level, the FCC
would have to license dozens of new full power and low-power radio
licenses to new local entrants and re-allocate spectrum to new local
entrants during the digital audio broadcast transition.
Radio Programming in the Wake of Consolidation
12. Homogenized Programming: Just fifteen formats make up 76% of
commercial programming.
13. Large Station Groups Program Narrowly: Owners who exceed or
exactly meet the local ownership cap tend to program heavily in just
eight formats.
14. Only Small Station Groups Offer Niche Formats: Niche musical
formats like Classical, Jazz, Americana, Bluegrass, New Rock, and Folk,
where they exist, are provided almost exclusively by smaller station
groups.
15. Small Station Groups Sustain Public-Interest Programming:
Children's programming, religious programming, foreign-language and
ethnic-community programming, are also predominantly provided by
smaller station groups.
16. Format Overlap Remains Extensive: Radio formats with different
names can overlap up to 80% in terms of the songs played on them.
Figure 3: Average Pairwise Overlap Between Stations in the Same Format,
By Owner, June 25-July 1, 2006.
17. Individual Stations Use Highly Similar Playlists: Playlists for
commonly owned stations in the same format can overlap up to 97%. For
large companies, even the average pairwise overlap usually exceeds 50%
[see Figure 3].
18. Network Ownership Is Also Concentrated: The three largest radio
companies in terms of station ownership are also the three largest
companies in terms of programming-network ownership.
Conclusion
Radio consolidation has no demonstrated benefits for the public.
Nor does it have any demonstrated benefits for the working people of
the music and media industries, including DJs, programmers--and
musicians. The Telecom Act unleashed an unprecedented wave of radio
mergers that left a highly consolidated national radio market and
extremely consolidated local radio markets. Radio programming from the
largest station groups remains focused on just a few formats--many of
which overlap with each other, enhancing the homogenization of the
airwaves.
From the recent new-payola scandal to the even more recent
acknowledgements that giant media conglomerates have begun to fail as
business models, we can see that government and business are catching
up to the reality that radio consolidation did not work. Instead, the
Telecom Act worked to reduce competition, diversity, and localism,
doing precisely the opposite of Congress's stated goals for the FCC's
media policy. Future debates about how to regulate information
industries should look to the radio consolidation story for a warning
about the dangers of consolidated control of a media platform.
About Future of Music Coalition
Future of Music Coalition (FMC) is a national non-profit education,
research and advocacy organization that identifies, examines,
interprets and translates the challenging issues at the intersection of
music, law, technology and policy. FMC achieves this through continuous
interaction with its primary constituency--musicians--and in
collaboration with other creator/citizen groups.
About the Primary Author
Peter DiCola is a Ph.D. candidate in economics at the University of
Michigan in Ann Arbor. He received his J.D. magna cum laude from the
University of Michigan Law School in May 2005, and was awarded the
Henry M. Bates Memorial Scholarship. Currently, he serves as the
Research Director of the Future of Music Coalition while he works on
his dissertation. He has research interests in the fields of
telecommunications law, intellectual property law, law and economics,
labor economics, and industrial organization. He is the co-author, with
Kristin Thomson, of Radio Deregulation: Has It Served Citizens and
Musicians? (2002), which was cited by the U.S. Court of Appeals for the
Third Circuit in Prometheus Radio Project v. FCC. He has also written a
chapter, ``Employment and Wage Effects of Radio Consolidation,'' for
the scholarly collection Media Diversity and Localism (Lawrence Erlbaum
and Associates, 2006).
______
Response to Written Question Submitted by Hon. Daniel K. Inouye to
Mac McCaughan
Question. As several of our witnesses have noted, there was a wave
of consolidation in radio following the 1996 Telecommunications Act.
With fewer stations owned by individuals from within the community,
what impact has this had on localism?
Answer. As I stated in my testimony before the Committee,
consolidation has had a chilling effect on broadcast diversity and
localism. The radio that I grew up listening to is in danger of
extinction. Locally owned, non-commercial and college stations are
dwarfed by corporate broadcasting, which places advertising revenue and
stockholder interests above the programming needs and desires of
communities. For musicians and labels, this means dwindling
opportunities for their releases to be heard on the mainstream
stations. Non-local ownership means important relationships and
connections between broadcasters and members of communities are simply
not made. Listeners are aggregated into the broadest possible
demographics in order to sell more ads, with little to no regard for
local and regional characteristics. Our label, Merge Records, counts
its success almost exclusively on non-commercial and college radio, as
well as the Internet. Congress and the FCC need to not only nurture and
protect existing non-com broadcasters, but also provide the means by
which more commercial stations can be independently and diversely
owned.
______
Response to Written Questions Submitted by Hon. Maria Cantwell to
Mac McCaughan
Question 1. Do you consider low-power FM service a success? Do you
believe that Low&wer FM service has promoted competition, diversity,
and localism?
Answer. Low&wer FM certainly helps offset some of the damage done
by consolidation. Given its inherent spectrum limitations, however,
there is no way LPFM can compete with Big Radio. But since commercial
broadcasters often fail to serve the communities in which they do
business, every little bit helps. I'd say there's more work to be done
in this area, and strongly encourage Congress to remove existing caps
on LPFM stations in urban markets.
Question 2. It sounds like your label, Merge Records, is having a
very successful year. As you mentioned in your testimony, albums by
Arcade Fire and Spoon have both debuted in the Billboard Top Ten, and
their tour dates are selling out. And this is in spite of the fact
these albums are receiving very little airplay on commercial radio
stations. Your label has been is business for over twenty years. What
would you say is the biggest difference in how commercial radio
stations promote artists' works today as compared to prior to the
Telecom Act of 1996? Do you attribute these changes to increased
concentration in radio ownership?
Answer. I don't actually see a huge difference in how commercial
stations promote artists' work today versus how this was handled pre-
1996. My personal feeling is that commercial radio has always supported
the most mainstream and middle-of-the-road artists because those acts
have typically been the ones who sold the most records. Commercial
radio is first and foremost concerned with selling advertising, and
less interested in exposing listeners to new or adventurous music. As
an independent label, Merge has never depended on commercial radio to
reach potential listeners. College, non-commercial and public radio has
traditionally provided our strongest platform to the airwaves.
That having been said, I believe the Telecom Act hastened the
disappearance of DJ-driven commercial radio. Within a handful of years,
the Nation was deprived of the few remaining commercial proponents of
``alternative'' music. It seems odd, but we now live in a time in which
independent labels such as ours are growing, while major label sales
continue to plummet. Although Merge artists are selling more records
than ever before and making a mark on the Billboard charts, the
corollary radio outlets one would expect to be supporting such growth
in the independent sector are simply not there.
Question 3. In your testimony you say that commercial radio is
about aggregating the largest possible number of listeners in a
targeted demographic. If that is the case, can you explain why bands
such as Arcade Fire and Spoon that appears to appeal to certain
targeted demographic groups by virtue of CD sales; concert ticket
sales; etc.; do not receive airplay on broadcast radio? What are some
of the barriers that bands such as the ones on your label are facing?
Answer. In the same way that I cannot explain why the major labels
continue to pursue failing policies in the music marketplace, I
likewise have no explanation regarding commercial radio practices. As I
previously stated, Merge has never been able to rely on commercial
radio, meaning we've essentially operated as though it were not an
option. We've simply found other ways to get our music out there. I can
say that commercial radio (as well as television and print media) has
historically responded more favorably to labels that spend huge amounts
of money advancing their releases, and have failed to pay much
attention to grassroots promotion until the results of these often fan-
driven campaigns are such that they can no longer be ignored.
Still, commercial rock radio--or ``modern rock,'' as it's often
called--wants to be seen as introducing new bands, rather than playing
catch up. But in the case of Spoon and Arcade Fire, programmers are
essentially behind the curve. Oftentimes, if a band gets big without
the help of commercial radio, these stations keep the groups at arm's
length. They would rather ``break'' a band that's being promoted at
great expense by a major label than spin a song from an indie act
popularized through word-of-mouth, college radio or the Internet.
Question 4. As a label owner, are you concerned about payola? Do
you believe that different forms of payola continue to be engrained in
radio industry practices? Do you believe that the action the FCC has
taken will be effective in curbing, if not eliminating these practices?
Do you believe Congress may need to intervene?
Answer. I have to say I've never been terribly concerned about
payola because Merge has essentially operated under the assumption that
commercial radio was not going to provide a supportive platform for our
artists. As I previously stated, we have forged a parallel path,
surviving and thriving on a network of non-commercial broadcasters more
inclined to support our releases. In other words, I've never felt like
it was payola that was keeping Merge artists off the corporate
airwaves. I instead blame the unadventurous and homogenous programming
of the majority of commercial radio formats. Alongside such
programming, our bands could never be accepted.
There is another form of payola I'd like to address. It's more
invisible, but also more institutional. Bands are often encouraged to
perform at station-sponsored events, many of them in support of worthy
causes. As the acts often aren't receiving any money for these
appearances, they pay equipment, travel and associated expenses either
out-of-pocket, or from a label fund. The implication is that if the
band plays such an event, they are more likely to get airplay on the
sponsor station. This is, of course, not explicit in any of the
corresponding contracts. But many developing acts feel that this is the
only way they'll be considered for inclusion on certain radio
playlists.
______
Response to Written Question Submitted by Hon. Daniel K. Inouye to
W. Russell Withers, Jr.
Question. Payola has a long and unfortunate history on the radio
dial. In recent years, however, we have seen efforts by then-New York
State Attorney General Eliot Spitzer and the FCC to put a halt to this
practice. In the aftermath of these settlements in New York and at the
FCC, do you think we have put an end to payola? Do these settlements
enhance the ability of local and independent artists to get on the air?
Answer. I can only speak directly on behalf of Withers
Broadcasting, which has a strict policy against payola, and has never
had any allegations of failing to comply with Section 507 of the
Communications Act. With respect to NAB, NAB has a long history of
cautioning and informing its members regarding payola. Just last year,
NAB sent a comprehensive packet of information to each of its more than
8,300 radio and television members reminding them of the importance of
ensuring compliance with all sponsorship identification rules,
including the payola rules, and also discussing the settlements in New
York. NAB urged broadcasters to renew their familiarity with the rules
and their stations' procedures for ensuring compliance with them. NAB
reminded broadcasters to ensure they have a current sponsorship
identification/payola compliance plan, and to ensure that such
compliance procedures are followed, NAB urged stations to consider
conducting a review of their plans with all employees. As part of that
communication, NAB also released a revised version of a long-standing
legal memo regarding payola that is available on our website. NAB will
continue these efforts on a consistent basis going-forward.
I am not aware of any relationship between the settlements in New
York and independent artists' access to radio stations.
______
Response to Written Questions Submitted by Hon. Maria Cantwell to
W. Russell Withers, Jr.
Question 1. Do you consider low-power FM service a success? Do you
believe that low-power FM service has promoted competition, diversity,
and localism?
Answer. As a general matter, we believe that the expressed goals
for low-power FM service are admirable. NAB has always supported the
concept of allowing nonprofit organizations and state and local
governments to operate low-cost, micro-power, commercial-free stations
for the benefit of small community areas, so long as such services do
not cause harmful interference to existing full-power stations. We
applaud those entities that follow the FCC's rules governing LPFM
service and welcome them as complements to full-power radio service.
For example, there are certainly some LPFM stations that target niche
listeners not reached by commercial radio, and we appreciate that in
these instances, LPFM service can benefit the entire radio industry by
attracting audience members who otherwise might not listen to the
radio.
On the other hand, NAB and others are troubled by the portion of
the LPFM industry that use their licenses for other purposes. We have
seen press reports and heard complaints from NAB members that certain
LPFM stations do little more than air syndicated programming that is
not produced locally, and that other LPFM stations routinely air
commercials. Moreover, despite the FCC's best efforts, there are
certain LPFM stations that frequently flout the rules prohibiting
harmful interference to full-power stations. Finally, what often gets
lost in the debate over LPFM is the wide array of locally-oriented
news, public affairs, emergency information and other programming that
experienced, committed full-power FM stations deliver every day, all of
which could be irreparably diminished by interference from neighboring
low-power FM services.
Question 2. Are there full power radio stations that operate short-
spaced? How many full power short-spaced stations are broadcasting in
the U.S. today? What is the NAB's position on short-spaced stations?
Answer. Yes, there are full power radio stations that operate on a
short-spaced basis. Although we do not have firm recent figures, to the
best of our knowledge, I believe that approximately 50 percent of Class
B and Class A stations operate short-spaced vis-a-vis other full-power
stations. As a general matter, NAB believes that all full power
stations must be able to operate free of interference in order to
continue to offer their audiences a wide array of high-quality local
programming.
Question 3. Current law says the FCC may not eliminate or reduce
the minimum distance separations for third-adjacent channels for low-
power FM stations. Does the FCC have the ability to eliminate or reduce
the minimum distance separation for second-adjacent channels for low-
power FM stations?
Answer. Current law is intended to protect the public from harmful
interference that would harm their ability to hear their local radio
stations. Although the Radio Preservation Act does not address whether
the FCC is precluded from relaxing second adjacent channel protections,
it would make no sense for the FCC to do so. Such an action would be
even more harmful to full-power FM service than would be the removal of
third-adjacent channel protection. Third adjacent channel protections
are necessary to ensure interference is minimized; eliminating second
adjacent channels has the potential to wreak havoc on the FM band and
render both full power FM stations and LPFM stations virtually
unlistenable. For radio broadcasters that are making a substantial
investment in their communities to offer greater amounts of local
programming through HD Radio multicasting, the potential harm from such
action would be tremendous.
Question 4. Unlike the transition to digital television, the
transition to digital radio is voluntary. Does the voluntary nature of
the transition present any unique challenges? Is there a timeline for
completion of the transition? Do you believe that any government
intervention will be wanted or necessary? Do you believe that there is
a critical mass of consumer electronics companies willing to build
digital radio receivers?
Answer. The voluntary nature of the digital radio transition
presents an inevitable ``chicken or egg'' challenge which broadcasters
have stepped-up to, as evidenced by the high penetration of HD Radio
signals in the major U.S. radio markets. Additionally, a significant
consortium of broadcasters has been formed to promote HD Radio (HD
Radio Alliance), and the technology developer, iBiquity Digital
Corporation, is actively promoting HD Radio to receiver manufacturers
and automobile companies.
There is no precise timeline for completion of the transition and
we do not believe that government intervention will be desirable or
necessary. In fact, although stations do not have to go digital, we
anticipate that the pace of stations launching digital will remain
steady and perhaps accelerate as stations recognize that it is in their
interest to do so.
We believe that a critical mass of consumer electronic companies
willing to build digital radio receivers is forming. Perhaps of greater
importance is the need to approach critical mass of auto manufacturers
including HD Radio receivers as standard equipment--this has not yet
been reached. A major milestone will be reached in the next year or so
as portable HD Radio receivers start to become available.
Question 5. Research conducted by the Free Press shows that the
ownership of commercial radio stations does not reflect the diversity
of this country. Mr. Withers, does the low number of women and minority
ownership of radio licenses concern the NAB? If so, what steps do you
believe your organization, the FCC, and us here in Congress can take to
foster greater diversity in the ownership of radio licenses?
Answer. Broadcasters have long supported programs that promote
minority and female participation in the media business. Through our
partnerships with the National Association of Broadcasters Education
Foundation (NABEF) and Broadcast Education Association, NAB has helped
create a comprehensive educational system that has brought hundreds of
new participants, from all backgrounds, into the broadcast industry.
NABEF, for example, conducts seminars and programs that nurture
participants at every level of career development--from entry-level
sales institutes to managerial-level professional programs at major
universities, to executive-level Broadcast Leadership Training (BLT)
for those who aspire to own stations.
More specifically, NABEF sponsors Media Sales Institutes at Howard
University, Florida A&M and the Spanish Language Media Center of the
University of North Texas. These intensive ten-day training programs
prepare talented students with diverse backgrounds for sales careers in
the broadcast industry. To date, these programs have trained over 220
students for media sales careers. Close to 90 percent have been hired.
More recently, NABEF has created an internship program, open to college
seniors and recent college graduates, for women and people of color who
are interested in broadcast technology and engineering careers. At the
management level, NABEF sponsors an Executive Development Program for
Radio Broadcasters at Georgetown University and a Management
Development Seminar for Television Executives at Northwestern
University. For senior level broadcast managers who aspire to advance
as group executives or stations owners, particularly women and people
of color, NABEF offers the BLT program, modeled after weekend MBA
programs. To date, more than 15 percent of BLT graduates have gone on
to acquire stations, and many others are in various stages of station
acquisition.
As NAB has frequently explained, the public interest is best served
by policies designed to encourage minority and female participation in
a competitively vibrant broadcast industry. Creating a fragmented,
undercapitalized and uncompetitive broadcast industry via undue
restrictions on broadcast ownership would not represent an effective
means of promoting minority and female ownership. Instead, Congress and
the FCC should look for solutions promoting the long-term viability of
women and minority entrants into broadcasting.
Thus, NAB strongly supports policies that would help ameliorate the
lack of access to capital that everyone agrees inhibits small and
minority- and female-owned businesses from entry into the broadcasting
and other communications-related industries. The FCC's previous tax
certificate program was such a policy. Congressional reinstatement of a
similar tax incentive program would be, in the opinion of many
including the FCC Advisory Committee on Diversity for Communications in
the Digital Age, one of the most direct and effective methods of
encouraging minority ownership in broadcasting. Congressman Charles
Rangel of New York and Congressman Bobby Rush of Illinois have each
introduced tax incentive legislation in this Congress. NAB encourages
prompt Congressional approval of such tax incentive legislation. NAB
also supports a range of other proposals made by the Minority Media and
Telecommunications Council to the FCC to promote the entry and
participation of minorities and women in broadcasting. These proposals
include modifying FCC attribution rules that discourage existing
broadcasters from providing investment capital to potential entrants
into the broadcast industry; providing economic incentives for
broadcasters to create and nurture incubator programs; providing
incentives to encourage the leasing of spectrum to new entrants;
modifying FCC rules that limit the ability to sell certain
``grandfathered'' clusters of radio stations to small and minority/
female owned businesses; encouraging banks and other financial
institutions to provide debt financing to qualified small or minority/
female entities; etc. NAB has also previously expressed concern about
overly restrictive FCC auction rules that would impair small business
participation in spectrum auctions by inhibiting their ability to raise
capital and attract investors (including larger communications
entities) without stripping these small businesses of benefits (such as
bidding credits) designed to help them succeed in auctions. In sum, NAB
believes the best way for private industry, the FCC and Congress to
promote greater participation by minorities and women in the broadcast
industry is through public-private partnerships and market-based
stimulants that will promote both entry and the long-term viability of
new entrants in a competitively healthy broadcast industry.
NAB further observes that the assumption that permitting the common
ownership of broadcast stations automatically has a deleterious effect
on minority participation in the broadcast industry is unwarranted.
Data recently provided to the FCC by public interest groups concerned
about the level of minority ownership in broadcasting in fact shows
that members of minority groups owned a greater number of television
stations in 2006 than they did in 1998, before the FCC modestly relaxed
the television duopoly rule in 1999. Earlier studies conducted in 2000
and 2002 had found that minority groups increased their radio station
ownership after passage of the 1996 Telecommunications Act.
Question 6. Do you believe that the consolidation in the radio
industry as a result of the Telecom Act of 1996 has led to a loss in
localism?
Answer. The increase in common ownership that occurred after
passage of the 1996 Act has in fact enabled radio stations to better
serve their communities of license by helping ensure the financial and
competitive viability of free, over-the-air stations, especially
smaller ones. An examination of the history of the radio industry prior
to 1996 clearly demonstrates that localism is best sustained by
permitting broadcasters to compete effectively in the digital
multichannel marketplace.
In a detailed survey of the radio industry in 1992, the FCC found
that, due to ``market fragmentation,'' many in the radio industry were
``experiencing serious economic stress.'' Specifically, stations were
experiencing ``sharp decrease[s]'' in operating profits and margins.
FCC Radio Order, 7 FCC Rcd at 2759. By the early 1990s, ``more than
half of all stations'' were losing money (especially smaller stations),
and ``almost 300 radio stations'' had gone silent. Id. at 2760. Given
that the radio industry's ability ``to function in the `public
interest, convenience and necessity' is fundamentally premised on its
economic viability,'' the FCC concluded that ``radio's ability to serve
the public interest'' had become ``substantially threatened.'' Id.
Accordingly, the FCC believed that it was ``time to allow the radio
industry to adapt'' to the modern information marketplace, ``free of
artificial constraints that prevent valuable efficiencies from being
realized.'' Id.
Motivated by such concerns, Congress in the 1996 Act acted to
``preserve and to promote the competitiveness of over-the-air broadcast
stations.'' Congress found that ``significant changes'' in the ``audio
and video marketplace'' called for a ``substantial reform of
Congressional and Commission oversight of the way the broadcasting
industry develops and competes.'' House Report at 54-55. In 2003, the
FCC concluded that changes made possible by the 1996 Act had brought
financial stability to the radio industry.
Because, as the FCC found, financial viability is necessary for
radio stations to function in the public interest, ownership changes
following the 1996 Act have promoted localism by enabling radio
stations to continue serving their local communities and audiences with
entertainment and informational programming and vital emergency
information. The real threat to locally-oriented broadcast services is
not the joint ownership of stations but those stations' inability to
maintain their economic vibrancy in the face of multichannel and
Internet-based competitors that are not constrained by restrictions on
local ownership structure. Only competitively viable broadcast stations
sustained by adequate advertising revenues can serve the public
interest effectively and provide a significant local presence.
Proposals to turn back the ownership regulatory clock would create a
fragmented, undercapitalized broadcast industry unable to compete
against multichannel and other information/entertainment providers and
unable to serve the public interest effectively.
NAB moreover points out that thousands of radio stations remain
locally owned. According to the FCC, as of 2005, 6,498 radio stations
were locally owned. And all radio stations--whether locally owned or
not--provide valuable entertainment and informational programming as
well as other important services to local communities. In 2005, the
average radio station ran 169 public service announcements per week,
the equivalent of $486,187 in donated air time per radio station per
year, or a projected total for all radio stations of $5.05 billion.
Sixty-one percent of the PSAs aired by the average radio station were
about local issues. More than 19 out of 20 radio stations (98 percent)
reported helping charities, charitable causes or needy individuals by
raising funds or offering other support in 2005. Among radio stations
that raised funds for charities and causes, the average raised per
station was $94,299, with the projected amount raised by all radio
stations in 2005 totaling $959 million. See NAB, National Report on
Broadcasters' Community Service (rel. June 12, 2006). Clearly, the
radio industry continues to serve local communities and audiences
effectively.
______
Response to Written Question Submitted by Hon. Daniel K. Inouye to
Tim Westergren
Question. As several of our witnesses noted, there was a wave of
consolidation in radio following the 1996 Telecommunications Act. With
fewer stations owned by individuals from within the community, what
impact has this had on localism?
Answer. This is not a question to which I feel qualified to give an
answer. I have only operated in the Internet Radio business. My only
observations would be as a listener, in which capacity I have noticed a
steady decrease in the diversity of programming on local radio
stations, including a decrease in the amount of local content.
______
Response to Written Questions Submitted by Hon. Daniel K. Inouye to
S. Derek Turner
Question 1. As several of our witnesses noted, there was a wave of
consolidation in radio following the 1996 Telecommunications Act. With
fewer stations owned by individuals from within the community, what
impact has this had on localism?
Answer. As the question suggests, the wave of consolidation
unleashed by the 1996 Act resulted in large national chains acquiring
many stations that for decades had been locally owned and operated.
``Localism'' became the primary casualty of the cost-cutting measures
implemented by the new national-chain owners of these stations.
In many localities, the market power wielded by the largest players
increased dramatically in the years following the 1996 Act. Prior to
1996, the top firm in the average local market controlled about \1/3\
of the advertising revenues; by 2002 the average top firm had increased
its marketshare to near 50 percent. The share controlled by the top
four firms increased from 83 percent in 1996 to 93 percent by 2002.
This level of market power is seen in both large and small markets.
According the latest FCC report on the radio industry:
``In the 50 largest markets, on average, the top firm holds 34
percent of market revenue, the second firm holds 24 percent,
and firms three and four split the next 26 percent. For the 100
smallest markets, on average, the first firm holds 54 percent,
the second firm holds 30 percent, and the next two firms split
13 percent. Overall, in 189 of the 299 Arbitron radio markets
(over 60 percent of the markets), one entity controls 40
percent or more of the market's total radio advertising
revenue, and in 111 of these markets the top two entities
control at least 80 percent of market revenue.''
This concentration of market power in the hands of a few dominant
national conglomerates has had a strong negative impact on localism.
First, these companies are prone to operating their 6-8 local stations
from one single studio, severely limiting the access points local
citizens formerly had to these stations when they were individually and
locally owned. Second, these national conglomerates favor the practice
of ``voice tracking'', where a DJ pre-records a programming block in a
studio hundreds of miles away from the local community where it will
air. These DJ's will often ``pretend'' that they are actually in the
local community, when in fact they have likely never set foot there.
Finally the large national owners substitute nationally syndicated
programming, national recording artists and national news for local
programming. This move away toward localism has resulted in a loss of
regionalism and diversity that used to be present on the radio dial.
The concentration of market power has also had real impact on the
remaining local station owners and new local owners wishing to enter
the market. The large chains can use their local dominance to unfairly
compete with stations that wish to offer competing formats, by
temporarily lowering their advertising rates to undercut the local
competitor. The large chain can afford to cross-subsidize certain
stations, making it impossible for a less powerful local owner to
compete. The chains can also offer local advertisers multi-station
deals that the local single-station owner can't match. The national
chains are often vertically integrated, and can give their own local
stations preference when selling popular syndicated programming. The
vertically integrated companies also often own promotional vehicles
such as concert venues and billboards, which allows them to further
cement their competitive advantages over the smaller local owners.
Cumulatively, the consolidation enabled by the 1996 Act has created
artificial economies of scale in an industry that is supposed to be
local in focus. These artificial economies of scale favor national
content over local content, and crowd out local owners--those most
likely to best serve the goals of localism. This market is not natural,
and a rollback of consolidation can bring the market back to an
equilibrium where local service is the rewarded outcome.
Question 2. Your testimony discusses FCC policies that hinder the
agency's ability to assess the current state of minority ownership.
What steps should the FCC take to improve its data on minority
ownership?
Answer. The Commission currently collects highly accurate
information on the gender, race and ethnicities of licensees of full-
power commercial broadcast stations. The problem lies in how they have
used and summarized this raw data.
Currently all licensees of full-power commercial broadcast stations
file ``Form 323'' every 2 years. On Form 323, licensees disclose voting
and equity interests of all owners with greater than 5 percent stake in
the license. Since many broadcast companies consist of layers upon
layers of ``holding companies'', there are often dozens of Form 323
forms filed for each station. This practice complicates the
Commission's current method of analyzing the data (automated
harvesting). Furthermore, many of the larger companies do not actually
fill out Form 323, instead submitting their ownership information as a
pdf file attached to Form 323. Companies that file in this manner are
completely missed by the FCC's automated harvesting process.
The Commission could easily remedy this situation by overhauling
the way in which companies submit Form 323. They should require each
license holder to submit a single form for each station that lists the
ultimate parent company of the license, as opposed to the current
practice of filing dozens of forms for each ``holding company''. The
Commission should also require that each parent company list on this
single form the ownership information, prohibiting the companies from
filing the information as separate ``attached'' documents. The
Commission should also conduct random periodic audits to ensure that
each licensee is properly and timely filing Form 323 (our research
indicates that a small number of station owners have submitted
improperly filled out forms, or have not submitted forms biannually as
required).
The Commission currently does not require non-commercial or non-
full-power licensees (i.e., Class A or Translator stations) to file
gender, race and ethnicity information. It also does not require sole
proprietors to file. We feel that a more complete understanding of the
broadcast market can be gleamed by requiring all stations to file.
Once the Commission has adequately dealt with its own deficiencies
in analyzing Form 323 data, we feel that it should conduct annual
updates on the state of female and minority ownership, and investigate
how Commission ownership rules impact market entry and exit by female
and minority license holders. Having a basic understanding of the
market and the impact of policy is inherent to the Commission's ability
to adequately fulfill its mandates under Sections 257 and 309(j) of the
Communications Act.
______
Response to Written Questions Submitted by Hon. Maria Cantwell to
S. Derek Turner
Question 1. Do you consider low-power FM service a success? Do you
believe that low-power FM service has promoted competition, diversity,
and localism?
Answer. I certainly feel that the current stable of low-power FM
channels to be a success. These stations provide hyperlocal information
to communities; information that is often deemed unimportant by local
commercial broadcasters, and information that is sometimes missed by
public radio stations that often have a state-wide focus as opposed to
the neighborhood focus heard on LPFM stations.
However, the third-adjacent channel restrictions imposed on LPFM
have pushed these stations away from urban cities, where hyperlocal
information is rarely aired on the large commercial radio stations.
This restriction is totally unnecessary from a technical perspective,
and is stifling access to the airwaves in the urban cities--access by
groups that are more likely to be from underrepresented minority
communities.
LPFM has unquestionably promoted localism and diversity. LPFM
licensees are by design local and focused on local service. LPFM has
also enabled communities of color and women to gain access to the
airwaves, lowering (in a narrow fashion) barriers to entry. However,
LPFM is only a part of the solution to the problem of lack of diversity
on the public airwaves. Our country needs women and minority ownership
of full-power stations, and reversing the trend of consolidation is a
key component of the solution.
On the question of competition, the competitive threat posed by
LPFM to the larger commercial stations is negligible. Promotion of the
goal of competition in broadcast media, especially the radio market,
can only be achieved through a rolling back of the unprecedented level
of consolidation that occurred after the implementation of the 1996
Act.
Question 2. With digital radio, the ability for a radio station to
broadcast multiple digital audio streams from a single channel offers
great promise for increasing the diversity of programming in both
commercial and noncommercial radio. First, in your opinion, should the
FCC look at public interest obligations for digital radio broadcasters?
If so, what would be your top three things that you believe should be
done to promote competition, diversity, and localism? Second, how
should the FCC treat multicast digital radio channels? Should the FCC
allow a secondary market for these additional channels? Finally, should
the FCC count digital and multicast stations against the local radio
ownership caps?
Answer. We strongly feel that public interest obligations should
apply to digital radio broadcasting. Currently, the FCC has allowed
license holders access to more spectrum to broadcast digitally (using
so-called ``In-Band-On-Channel'' technology that requires the station
to use spectrum adjacent to their primary broadcast frequency), but has
not imposed even the most basic public interest requirements on the
users of this public spectrum.
In response to the request for the three top PIOs to apply to
digital broadcasters, we support (1) Mandatory localism requirements
mandating the airing of a minimum level of local civic or electoral
affairs programming and independently and locally produced programming;
(2) The prohibition of remote ``tracking'' programming and the
requirement of a person to be physically present in the station at all
times; and (3) Meaningful reporting requirements on the fulfillment of
local service, with reports made accessible via the Internet as well as
the station.
In addition to enforcing public interest obligation on digital
radio broadcasters, the Commission must address the issue of
subscription-based services. If the Commission chooses to allow a
secondary market, all public interest obligations should still apply,
and spectrum-fees should be collected. For example, the Commission
should limit the number of subscription-based services a station can
offer, and impose spectrum fees on subscription-based services that are
offered (and because they are generating an additional revenue stream
from a public resource, broadcasters should pay a ``spectrum use fee''
for their use of this public resource).
Multicasting increases each owner's ability to reach an
increasingly segmented audience. This furthers the ability of dominant
local owners to consolidate market power. This in addition to the
current litany of ill effects of consolidation in local radio markets
raises important regulatory questions for the Commission. I feel that
Congress should reinstitute a national cap on radio ownership and the
Commission should conduct an overhaul of its local ownership rules. In
conducting this process, the Commission should explore the socially
optimal level of local consolidation that best serves the goals of
localism, competition and diversity. When determining this market
optimum, the Commission should consider the impact of digital
multicasting.
Question 3. Your research shows that the ownership of commercial
radio stations does not reflect the diversity of this country. What
steps should we take to foster greater diversity in the ownership of
radio licenses? Do you see this happening under current law?
Answer. The results of our research demonstrate that any policy
changes that allow for increased concentration in television and radio
markets will certainly decrease the already low number of female- and
minority-owned broadcast stations. Enacting regulations that lead to
such outcomes directly contradicts the Commission's statutory and legal
obligations under the 1996 Telecommunications Act.
To promote female and minority radio ownership, the Commission
should enact policies that de-concentrate local media markets. By
reducing consolidation at both the national and local level, the
Commission can help to deflate the bubble of artificial economies of
scale that its pro-consolidation policies helped to create. This will
result in lower barriers to entry and more stations available for
purchase by local single station owners, who are far more likely to be
women and people of color. The simple answer is for the Commission to
roll back local ownership caps that currently allow a single owner to
control 8 stations in certain markets. These caps should be far lower.
Congress needs to play a role, enacting de-concentration policies
that are currently beyond the Commission's authority. Congress should
reinstate a national ownership cap, reinstate the tax-certificate
policy, and set the license renewal period for every 3 years (ensuring
that the renewal process is meaningful and involves the public).
It is important to note that the effects of other policies aimed at
increasing female and minority broadcast ownership--such as tax
credits, relaxed equity/debt attribution rules, incubator programs, or
digital channel leasing--will be negligible in an environment of
increased market consolidation at the local level. Rolling back
consolidation is paramount.
______
Response to Written Question Submitted by Hon. Daniel K. Inouye to
Carol Pierson
Question. As several of our witnesses noted, there was a wave of
consolidation in radio following the 1996 Telecommunications Act. With
fewer stations owned by individuals from within the community, what
impact has this had on localism?
Answer. Chairman Inouye, it is our belief that the massive
consolidation that followed passage of the 1996 Telecommunications Act
had a devastating impact on localism, competition and diversity in
local markets. Research demonstrates that we have lost over \1/3\ of
local owners in the past 10 years, as these firms struggle to compete
against out of town conglomerates. While supporters of consolidation
claim that this consolidation actually leads in an increase of
available formats, the Future of Music Coalition demonstrated that in
the commercial sector, niche musical formats (including classical,
jazz, blues, bluegrass, opera, folk, etc.) are nearly exclusively
programmed by companies that are below the local ownership cap. I have
attached for your reference a letter to the Committee from FMC that
details some of their findings. If Congress is concerned about bringing
localism and a true diversity of culture back to commercial radio, they
must explore strategies to re-prioritize local ownership and control.
Ironically, this loss of localism in many ways creates a
competitive advantage for the non-commercial sector, as locally based
community radio stations have emerged as the dominant source for local
news, cultural programming and information. This does not necessarily
mean commercial consolidation has been a good thing for community
radio, as many disgruntled listeners have left the FM band altogether
and adopted new technological platforms. Instead, the best world for
community and commercial broadcasters alike would feature robust and
innovative local broadcasting on the commercial band complemented by
expansion and protection of the noncommercial sector. This combination
will bring listeners back to terrestrial radio, which will benefit both
commercial and non-commercial broadcasters.
______
Response to Written Questions Submitted by Hon. Maria Cantwell to
Carol Pierson
Question 1. Do you consider low-power FM service a success? Do you
believe that low-power FM service has promoted competition, diversity,
and localism?
Answer. LPFM has been a significant success. When the service was
first proposed in the late 1990s, advocates believed that several
hundred organizations would be interested in running their own
stations. Clearly, the demand for the service was underestimated, as
thousands of churches, schools, community groups, Native Nations and
local governments have expressed interest in gaining licenses.
The effectiveness of the initiative has obviously been limited by
the Congressional ban that has limited LPFM to smaller communities and
rural areas. Even with these restrictions, however, LPFM broadcasters
have demonstrated their commitment to locally-originated, innovative
programming. From coverage of local political issues, to providing a
platform for local culture, to serving as a critical partner for first
responders, LPFM broadcasters have provided a significant service for
communities across the Nation.
Question 2. A single entity can own multiple translator stations,
in effect creating a network. Should there be a limit to the number of
low-power FM stations one entity should be able to license? Should the
FCC require a low-power FM licensee to be located within the coverage
area of its signal?
Answer. LPFM is intended to be a locally originated and locally
based service. At some point it may be worth considering revisiting
some of the local origination rules, but at this point the local
restrictions are key to ensuring that LPFM provide a unique local
voice. Regarding your second question, in some situations the physical
address of the licensee is outside the limited coverage area of its
signal. This is often due to the Congressional restrictions on placing
LPFM stations on third adjacent channels. While we agree with existing
FCC rules that emphasize local control and content, we do not believe
it is necessary for the physical address of the licensee to be within
the coverage area, but the licensee organization should be
headquartered or their Board of Directors should live within a
reasonable distance of the transmitter site, perhaps 10 miles in urban
areas and 25 miles in more rural locations.
Question 3. What do you see as the most significant challenges an
organization faces in determining whether or not to apply for a Low
Power FM license?
Answer. As Native Public Media experienced in the recent NCE window
process, the largest challenge is matching interested organizations
with available spectrum. There is a vast amount of unused spectrum that
potential community broadcasters are unable to access because of the
Congressional ban on issuing LPFM licenses in urban markets and the
significant length of time between opportunities to apply for full
power stations.
There are numerous other challenges--running a LPFM station is not
easy. Potential licensees have to identify and hire engineers, develop
corporate structures, make programming decisions, develop a budget, and
raise funds to make the station sustainable. Fortunately, there are
hundreds of case studies now operating and significant mentoring and
resource sharing opportunities through organizations like Native Public
Media, National Federation of Community Broadcasters, Prometheus Radio
Project and others.
Question 4. Do organizations that obtain construction permits from
the FCC for low-power FM stations usually go forward in constructing
the station?
Answer. The overwhelming majority of truly local LPFM applicants
who are granted a construction permit move ahead with building the
station. In a few instances, organizational or budgetary concerns made
the building or operation of a station unfeasible. Thankfully, these
instances have been rare. As a general rule, LPFM applicants are very
aware of what they are doing.
Question 5. Is the FCC currently experiencing a significant backlog
in processing applications for low-power FM construction permits?
Answer. It is our understanding that virtually all of the pending
LPFM applications have been processed.
Question 6. Based on your experience in community media, do you
believe the current content origination rules for low-power FM stations
are too strict or not strict enough with respect to supporting
localism?
Answer. We believe the existing rules create an appropriate
balance. LPFM is meant to serve a very specific local niche that is at
its heart local. While the rules permit transmission of some syndicated
or network programming, no organization should attempt to use a LPFM
license as a de facto translator or network affiliate. While the
current rules are adequate, we generally support efforts by the FCC to
ensure localism. For example, the FCC is currently considering making
permanent its initial rule that no entity can own more than 1 low power
station, and we agree with such limitations to ensure that these radio
stations are used by and for the local communities.
Question 7. Are community radio broadcasters giving any thought
about broadcasting in digital at this time?
Answer. Many community radio stations have converted to digital
broadcasting (HD), in most cases with support from the Corporation for
Public Broadcasting or the Public Telecommunication Facilities Program
at the Department of Commerce. Several community radio stations have
been pioneers in developing new applications for digital broadcasting
including multicasting and surround sound. The opportunity that HD
radio offers to expand local service is significant. Community radio
stations, particularly in rural areas, find themselves trying to serve
multiple communities of interest, sometimes in different languages. HD
radio's multicasting capability allows separate channels in different
languages or offering varied formats which can better serve the
audience. It is important that Federal support for this conversion
continue so that community and public radio stations can utilize this
enhanced service. The Corporation for Public Broadcasting (CPB) will be
doing a day-long intensive meetubg just prior to NFCB's Annual
Community Radio Conference, March 25, in Atlanta. The stations that are
least likely to have converted are the ones with the smallest budgets
in the most rural areas. This includes nearly all of the Native
American stations. CPB is trying to be sure these stations are not left
behind. According to CPB, 312 community and public stations
transmitters have converted to HD; another 300 are in the process; and
87 are multicasting. This leaves nearly 400 transmitters yet to be
converted. We want to be sure that Federal support continues so that a
``digital divide'' isn't created in public broadcasting.
______
Response to Written Question Submitted by Hon. Daniel K. Inouye to
Dana Davis Rehm
Question. As several of our witnesses noted, there was a wave of
consolidation in radio following the 1996 Telecommunications Act. With
fewer stations owned by individuals from within the community, what
impact has this had on localism?
Answer. Passage of the 1996 Telecommunications Act seems to have
enabled successful ownership consolidation in commercial radio, but any
benefits beyond some short-term economic returns are questionable at
best. What is most often called localism--the appreciation of and
investment in local/regional assets to gather and distribute a
collection of programming that informs and improves community--has
suffered. While public radio has committed more resources to localism
and community, the last decade has seen a remarkable retreat in other
American broadcast media from careful, serious and balanced
presentation of news, information and ideas.
Many different groups and sources have documented this decline in
localism, or commitment to community. The Future of Music Coalition,
for example, released a study in December 2006 which found that ``the
rapid consolidation of the commercial radio industry that followed the
Telecommunications Act of 1996 has led to a loss of localism, less
competition, fewer viewpoints and less diversity in radio programming
in media markets across the country.'' The trends identified by the
Future of Music Coalition bring greater clarity to the impact of
consolidation on localism, or as we describe it, community. Not only
are there fewer owners of commercial radio outlets, fewer viewpoints
and decreased diversity, but not surprisingly, there are fewer
Americans tuning in, and they are spending less time listening. The
Coalition notes a 22 percent drop over the past 14 years in commercial
radio listening.
These trends in commercial radio are bad enough, but there is
further cause for concern considering the trends in local newspapers
that traditionally covered the full range of community life, according
to the ``The State of the News Media 2007'' report from the Project for
Excellence in Journalism at the Pew Research Center. ``In contrast with
most other news media such as network television and radio, the
newspaper industry has stood out because it sustained and in many cases
enlarged its newsrooms in the 1980s and 1990s, even as its share of the
audience declined. That trend is now over, probably permanently. The
newsrooms of America's newspapers are shrinking. The industry began
2006 with roughly 3,000 fewer full-time newsroom staff people than it
had at its recent peak of 56,400 in 2000. Over the course of the year,
that number fell further, and more cuts are coming in 2007.''
As mentioned in my written testimony, public radio is responding to
this increasing gap between the public's needs and the service provided
by broadcast and print media with the Local News Initiative, a national
effort to increase public radio's service to communities. We are
investing in building the capacity of local, independent stations to
provide in-depth, contextual and balanced news. Our goal is to
strengthen high-quality local news programming in communities across
America. To accomplish this we are developing and promoting standards
of quality and craft; growing, diversifying and developing the talent
of those who work on public radio's locally produced news/talk/
information programming and piloting collaborative approaches to make
more effective and efficient use of limited resources.
It is also worth noting that the audience for public radio has
increased, not decreased, over the past decade. Today some 30 million
Americans turn to public radio stations each week for news and
information covering world, national, regional and local events. With
that said, the decline in commercial radio listening and relevance to
local communities is a matter of great concern to public radio, as it
may signal the decline of free and accessible service to the public.
______
Response to Written Questions Submitted by Hon. Maria Cantwell to
Dana Davis Rehm
Question 1. Do you consider low-power FM service a success? Do you
believe that low-power FM service has promoted competition, diversity,
and localism?
Answer. NPR and most of the public radio community support the
concept of Low Power FM stations and the potential it has to bring
greater diversity to radio programming. In several instances, most
recently the hurricane disasters in the Gulf, Low Power FM stations and
public radio stations were the only stations on the air with local news
about changing events, disaster relief information and other essential
information.
It may be too early in the development of Low Power FM and its roll
out to arrive at a sound conclusion about its impact on competition,
diversity and localism. Certainly, the potential exists within the
concept of Low Power FM to broaden content diversity and connections to
community. Many stations that are members of the National Federation of
Community Broadcasters can serve as role models for what Low Power FM
stations could contribute to diversity and localism.
Question 2. NPR has been at the forefront in the rollout of digital
radio. In your written testimony you state that by the end of the year
you anticipate that 350 public radio stations will be on the air with a
digital signal. What have been some of the challenges your stations
have faced in rolling out the technology? How critical has the Federal
Government's role been in contributing to the pace of the rollout? Do
you believe that there is a critical mass of consumer electronics
companies willing to build digital radio receivers today?
Answer. NPR and public radio have embraced digital broadcasting
technology because it offers the potential to expand public service
programming. In fact, NPR was the leading proponent within all of radio
for testing and demonstrating the workability and utility of
multicasting. Today, multicasting is a central component of public
radio's plans to utilize the inherently inclusive nature of digital
broadcasting technology to broaden our programming diversity and deepen
our connections to communities.
The challenges facing public radio stations are significant. Most
important among these are the relatively slow appearance of affordable
digital radio receivers and low awareness of multicasting among the
public. Stations can readily present traditional public radio formats
on their new HD channels, such as news and talk programming, classical,
jazz, folk and eclectic music. Development of new formats or of highly
localized services is expensive and difficult to justify when the
audience doesn't yet have wide access to HD receivers. As with all new
content distribution technologies, there will be phases of
experimentation to determine which programming offerings are needed and
supported by our audiences.
The Congress' funding support of public radio's digital transition
has been indispensable. Without these additional annual appropriations
from Congress, it is doubtful that many public radio stations would
have been able to afford the costs of conversion. Congressional funding
assistance will remain important for many years to come to ensure that
all public radio stations, especially those serving rural audiences,
are able to afford this absolutely essential conversion to digital
technology.
The encouragement and support of the Federal Communications
Commission have also been critical; each action has affected the pace
of conversion within public radio and the pace of receiver development
and deployment by consumer electronics companies. The experimental
multicasting authority granted by the Commission in 2004 made it
possible to develop and test multicasting in communities across the
country, leading to improvements that allow not just one, but two
additional channels of service beyond the main broadcast signal.
The permanent authorization earlier this year accelerated receiver
development and marketing. Currently, 60 receiver makers are providing
over 50 models of HD receivers equipped for multicasting, and prices
have dropped from $399 to entry level units selling at $99. We continue
to hope the Commission will permit public radio stations to utilize the
connection potential of digital radio with as few conditions as
possible so that we can fully develop the public service potential of
this emerging technology.